ISA 600 (Revised) – A timely IAASB initiative for Financial Reporting in the Tourism Industry
By Zayd Maniar , International Liaison Partner at Crowe UAE
The International Auditing and Assurance Standards Board has released an exposure draft of a standard for improving the quality of audits of group financial statements.
BACKGROUND PROPOSED IAS 600
The IAASB Exposure Draft, ISA 600 (Revised), Special Considerations—Audits of Group Financial Statements (Including the Work of Component Auditors), proposes more robust requirements and enhanced guidance that:
- Clarifies the scope and applicability of the standard.
- Emphasizes the importance of exercising professional skepticism throughout the group audit.
- Clarifies and reinforces that all ISAs need to be applied in a group audit through establishing stronger linkages to the other ISAs, in particular to proposed ISA 220 (Revised), ISA 315 (Revised 2019) and ISA 330.
- Focus the group engagement team’s attention on identifying and assessing the risks of material misstatement of the group financial statements and emphasizes the importance of designing and performing procedures that are appropriate to respond to those assessed risks. When component auditors are involved, the proposed standard highlights the importance of the group engagement team’s involvement in the component auditor’s work.
- Reinforces the need for robust communication and interactions between the group engagement team, group engagement partner and component auditors.
- Includes new guidance on testing common controls and controls related to centralized activities.
- Includes enhanced guidance on how to address restrictions on access to people and information.
- Enhances special considerations in other areas of a group audit, including materiality and documentation.
TAKEAWAY
There is no doubt that the pandemic has created unprecedented challenges for the Travel, Tourism and Hospitality industry. However, with challenges come opportunities. Several regional airlines and hotel chains are backed by Sovereign Wealth Funds. It’s no surprise that they are keen to acquire trophy assets globally, whilst valuations are low.
What this means for those of us dealing with the Financial Reporting aspects is that there will be a greater number of entities to consolidate, as more global assets come under the umbrella of these burgeoning Investment Funds.
The IAASB has been working diligently with global professional bodies such as the ICAEW. The aim is to update the International Standards on Audit to help deal with recent and upcoming changes to the International Financial Reporting Standards, which are moving away from a Rules based and more towards a Principles based approach.
Whilst still at an Exposure Draft stage, the revised standard aims to make growing between the Group and Component Auditors fair more cohesive. Hence, financial controllers may expect the teams to work closely on areas such as performance materiality, a refreshed approach to aggregation risk and a consistent approach to documentation.
This does make for quicker reporting at a group level, which will be welcome by stakeholders and investors who are keen to deal with the aftereffects of the pandemic. Earlier this week, the International Air Transport Association said global air passenger traffic is unlikely to recover to pre-Covid-19 levels before 2024, a year later than previously expected. We can hence expect to continue dealing with Audit issues pertinent to valuations, going concern as well as business combinations.
ABOUT AUTHOR:
Mr. Zayd Maniar is International Liaison Partner at Crowe UAE . He is a Fellow member of the Institute of Chartered Accountants in England and Wales and a registered Auditor with the Ministry of Economy, United Arab Emirates.
He is professionally affiliated withTraining – ICAEW, Committee Member – Travel, Tourism & Leisure Group ICAEW, International Auditing and Accounting Committee – Crowe , Seconded Treasurer – Dubai Hurricanes Rugby Football Club and Student Mentor at the University of Reading.