EBA欧洲银行-28EBA-2016-D-6952920Letter-to-Mr-Schilder-IAASB-re-Overview-ITC-Audit-Quality_10页_542kb

EBA Summary of Comments on IAASB's Overview of the ITC: Enhancing Audit Quality in the Public Interest

Core Content

The European Banking Authority (EBA) has provided detailed comments on the International Auditing and Assurance Standards Board (IAASB) document Overview of the Invitation to Comment: Enhancing Audit Quality in the Public Interest: A focus on Professional Scepticism, Quality Control and Group Audits. The EBA supports the IAASB's efforts to enhance audit quality and emphasizes the importance of professional scepticism, quality control, and group audit standards in maintaining public trust in financial reporting.

Main Views

1. Professional Scepticism

• Priority: The EBA urges the IAASB to prioritize professional scepticism as a critical element for audit quality, especially in the context of IFRS 9, which involves high estimation uncertainty.
• Definition and Application: Professional scepticism should be embedded in daily audit practice and should involve a critical assessment of audit evidence, not just management assertions. Auditors should gather and weigh evidence both for and against management's claims.
• Training and Education: The EBA supports the IAASB in incorporating professional scepticism into educational materials and training programs at the firm level.
• Role of Engagement Partners and EQC Reviewers: These roles should be more clearly defined, with the engagement partner ensuring that all team members are trained and that professional scepticism is fostered throughout the audit process. The EQC reviewer should also be involved from the planning stage and should challenge the audit team on how professional scepticism is applied.

2. Quality Control

• QMA Implementation: The EBA supports the development of a Quality Management Approach (QMA) as a key tool for audit firms to ensure quality control and good corporate governance.
• Tailoring QMA: QMA should be adaptable to the size, nature, and services of the audit firm, with particular attention to smaller firms to avoid undue burden.
• Enhanced Documentation and Communication: The EBA recommends that ISAs and ISQC 1 provide more explicit guidance on the documentation and communication between engagement partners and EQC reviewers, especially regarding significant matters and judgments.

3. Group Audits

• Challenges in Multijurisdictional Groups: The EBA supports the IAASB's proposal to revise ISA 600 to better address the complexities of group audits, especially when entities are located in multiple jurisdictions.
• Audit Rotation and Component Audits: With the introduction of audit rotation requirements in the EU, the EBA expects the IAASB to enhance the standards to ensure robust and consistent application of audit requirements in group audits.
• Two-Way Communication: The EBA emphasizes the need for enhanced two-way communication between the group engagement partner and component auditors, not only initiated by the component auditors but also on their own initiative.
• EQC Reviewer's Role: The EBA supports the enhancement of the EQC reviewer's role in group audits, including their involvement in the planning and execution phases, and their responsibilities in relation to the audit committee.

Key Recommendations

• Amend ISA 540 to ensure that auditors consider contradictory evidence and apply professional scepticism in the audit of accounting estimates.
• Develop a Common Framework for professional scepticism across ISAs, IESs, and IESBA Code to ensure consistency and clarity.
• Revise ISQC 1 to incorporate a QMA and provide guidance on its implementation, especially for smaller audit firms.
• Enhance EQC Reviewer Involvement throughout the audit process, including from the planning stage, and ensure comprehensive documentation of all significant audit matters.
• Strengthen ISA 600 to address the challenges of multijurisdictional group audits and improve communication and competence evaluation between group and component auditors.

Conclusion

The EBA views the IAASB's efforts to improve audit quality through professional scepticism, quality control, and group audit standards as essential for maintaining public confidence in financial reporting. The EBA encourages the IAASB to collaborate with EU oversight bodies and to ensure that the revised standards are practical, clear, and proportionate for all audit firms, especially smaller ones.