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Standard setting
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Reminder: Institute live webinars on financial reporting
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Don’t miss the following webinars in December and January:
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IASB Investor Update November 2022
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The International Accounting Standards Board (IASB) Investor Update includes an interview with Enitan Adebonojo, Senior Forensic Equity Analyst and Executive Director at an independent equity research firm and member of the Capital Markets Advisory Committee. It also includes key conclusions from the IASB’s Third Agenda Consultation that outlines its priorities for the next five years.
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IASB votes to retain impairment-only approach for goodwill accounting
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At its November 2022 meeting, the IASB voted to retain the impairment-only approach to account for goodwill. This tentative decision culminates a thorough evaluation that began with the Post-implementation Review of IFRS 3 Business Combinations in 2014.
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Invitation to comment
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The Institute is seeking comments on International Auditing and Assurance Standards Board’s (IAASB) Exposure Draft on Proposed International Standard on Auditing (ISA) 500 (Revised), Audit Evidence and proposed conforming and consequential amendments to other ISAs by 24 March 2023. The proposed changes:
- Provide a principles-based approach to considering and making judgments about information intended to be used as audit evidence and evaluating whether sufficient appropriate audit evidence has been obtained;
- Modernize ISA 500 to be adaptable to the current business and audit environment, while considering scalability for different circumstances, including the entity and the auditor’s use of technology, such as automated tools and techniques; and
- Emphasize the role of professional skepticism when making judgments about information intended to be used as audit evidence and evaluating the audit evidence obtained.
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Two weeks to the effective date of the new quality management standards
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Today marks the two-week countdown to 15 December 2022, by which firms will need to have designed and implemented a system of quality management (SOQM) that complies with Hong Kong Standard on Quality Management (HKSQM) 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements.
Below is a list of resources that help firms to implement the new and revised quality management requirements:
- The Institute’s Quality Management Manual comprises a pre-populated Risk Assessment Tool with over 100 examples of risks for firms to customize and add their own risks based on their assessment and circumstances.
- The Institute’s e-Learning series highlights the key requirements and provides practical applications and illustrated examples on how small and medium practitioners can meet the new requirements.
- The Institute’s Frequently Asked Questions lists out common questions and responses in relation to the design and implementation of the firm’s SOQM.
- The Institute’s Alert includes a 5-minute sound clip sharing by the former Chair of the IAASB on how a sole practitioner should identify the quality risks and responses for his/her firm; and an illustrative risk assessment process for the governance and leadership component of a firm’s SOQM.
- The recorded panel discussions prepared by the International Federation of Accountants (IFAC) discuss how firms are planning its implementation, share practical examples, tips and suggested good practices.
- In this article by the Institute of Chartered Accountants in England and Wales (ICAEW), a practitioner explains his firm’s strategy for the SOQM implementation, and how root cause analysis training can be tailored to individual businesses.
Online resource centres developed by the Institute and other professional bodies with collections of guidance on the quality management standard:
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Revised standard on risk assessment for 2022 audits
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Hong Kong Standard on Auditing (HKSA) 315 (Revised 2019), Identifying and Assessing the Risks of Material Misstatement is effective for audits of financial statements for periods beginning on or after 15 December 2021. It introduces major changes in the approach to risk identification and assessment which will have far-reaching effects for firms of all sizes.
The following resources provide tips and support for your implementation of HKSA 315 (Revised 2019):
Online resource centres developed by the Institute and other professional bodies with collections of guidance on HKSA 315 (Revised 2019) and its relevant counterparts:
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The Institute’s Auditing and Assurance Standards Committee meeting minutes
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Minutes of the 403rd meeting is now available.
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IAASB issues guidance on how amendments made to IFRS Standard IAS 1 Impact the ISAs
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This new guidance published by the IAASB helps users understand the impact on the ISAs due to narrow-scope amendments made to International Accounting Standard (IAS) 1, Presentation of Financial Statements by the IASB. It provides users with guidance on how to address the effect of the amendments on a number of illustrative auditor reports throughout the ISAs that assume, as part of the fact pattern, that the financial statements are prepared by the management of the entity in accordance with International Financial Reporting Standards (IFRSs). The amendments will be effective for annual reporting periods beginning on or after 1 January 2023, with early application permitted.
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Countdown to ISQM 1 – is your practice ready?
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This episode by the ICAEW discusses the rollout of the International Standard on Quality Management (ISQM) and what firms need to do before ISQM 1 is implemented on 15 December 2022.
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Are tests of controls needed regarding the ownership assertion?
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This guidance by CPA Canada provides auditors with factors to consider when determining how to obtain sufficient appropriate audit evidence to support the ownership assertion for financial statements that contain material crypto-asset balances.
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Crypto-asset mining: An overview and auditor considerations
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Read this article by CPA Canada to learn about the basics of crypto-asset mining, audit considerations for a crypto-asset mining entity (miner) and third-party service providers.
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HKICPA resource centre
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Access resources and publications at the Institute’s revamped Resource Centre to the Code which will keep you updated on the latest ethics pronouncements.
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Revised non-assurance services and fee-related provisions
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The revised non-assurance services and fee-related provisions of the Code significantly strengthen the guardrails around auditor independence in two important areas that have the potential to create incentives influencing auditor behavior — non-assurance services (NAS) provided to audit clients and fees. The revisions will be effective for periods beginning on or after 15 December 2022; otherwise, they will be effective as of 15 December 2022.
The following resources provide tips and support for your implementation of the revision:
- The Institute’s updatedEthics Circular 1 has incorporated the new and revised NAS provisions aiming at providing guidance to small and medium practitioners including sole practitioners, on their application of the Code to certain NAS and other topical issues.
- The Institute’s e-Learning course, titled Revised non-assurance services and fee-related provisions of the Code of Ethics for Professional Accountants provides an overview of the revisions and deeps dives into areas such as the new self-review threat prohibition for public interest entities audit clients; self-interest threats created by fees paid by an audit client; strengthened provisions regarding relative size of fees to the firm from a particular audit client, etc.
The Institute’s Resource Centre to the Code contains resources relating to the revisions, including those from the IESBA.
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The Institute’s Ethics Committee meeting minutes
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Minutes of the 252nd meeting is now available.
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IESBA releases comprehensive research on impacts of technology on ethics
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This article mentions that building on the February 2020 phase 1 report, the phase 2 report documents the impacts of disruptive and transformative technologies on the work of professional accountants, and provides extensive analysis and insights into the ethical dimension of those developments. The report also discusses the relevance and importance of the overarching principles and specific provisions in the International Code of Ethics for Professional Accountants (including International Independence Standards) in laying out the ethical guardrails for professional accountants as they face opportunities and challenges in their work as a result of rapid digitalization.
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ISSB November 2022 podcast & update
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The International Sustainability Standards Board (ISSB) podcast, with its chair and vice-chair highlighting the recent decisions and discussions during its November meetings, and a summary of its 15 -16 November meeting, are now available.
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