1THE AUDIT OF FINANCIAL STATEMENT ASSERTIONS This article looks at the effect of revisions to ISA 315, Identifying and Assessing the Risks of Material Misstatements through Understanding the Entity and its Environment with respect to financial statement assertions. These changes are as a result of the International Auditing and Assurance Standards Board’s (IAASB) project entitled ‘Addressing Disclosures in the Audit of Financial Statements – which resulted in a number of Revised ISA’s and Related Conforming Amendments’, which were published in July 2015. ADDRESSING DISCLOSURES IN THE AUDIT OF FINANCIAL STATEMENTS – REVISED ISA’S AND RELATED CONFORMING AMENDMENTS (JULY 2015) This article will focus on the changes made to ISA 315 as a result of the disclosures project and also provides useful guide to students on how to tackle questions dealing with financial statement assertions. For details of the other ISAs affected, please refer to the IAASB publication entitled ‘Addressing Disclosures in the Audit of Financial Statements’ (see 'Related links'). ISA 315 REVISED ISA 315 (Revised) states: ‘In representing that the financial statements are in accordance with the applicable financial reporting framework, management implicitly or explicitly makes assertions regarding the recognition, measurement and presentation of classes of transactions and events, account balances and disclosures’. Consequently auditors use these assertions when considering the potential types of misstatements that may occur and when designing and performing appropriate audit procedures. INTERIM AND FINAL AUDIT TESTS During the interim audit, the internal control system is documented and evaluated. This will determine the mix of tests of control and substantive tests but both will tend to focus on transactions that have occurred so far in the period. During the final audit, the focus is on the financial statements and the assertions about assets, liabilities and equity interests. At this stage the auditor will design substantive procedures to ensure that assurance has been gained over all relevant assertions.
2CHANGES MADE TO ISA 315 WITH RESPECT TO FINANCIAL STATEMENT ASSERTIONS Prior to revision the financial statement assertions were listed under three headings: •Assertions about classes of transactions and events for the period under audit •Assertions about account balances at the period end •Assertions about presentation and disclosure The revision to ISA 315 effectively incorporates the assertions about presentation and disclosure into the assertions about transactions and account balances – reducing the number of headings from three to two. The aim of combining the presentation and disclosure assertions is to focus auditors on the related disclosures when addressing the underlying transactions and events and account balances.