The IAASB on international auditing

Speaker 1:
Hi, and thanks for listening to the CPA Australia Podcast. We just wanted to take a brief moment before this episode begins to let you know that this particular episode was recorded before many were affected by the Coronavirus pandemic. So it sounds like the show isn't addressing the current global economic landscape. There's a reason for that, and that's because we recorded this in early March. We hope everyone is staying safe and to access all of CPA Australia's COVID-19 resources go to our dedicated content hub at cpaaustralia.com.au/COVID-19. Where you'll find COVID-19 related resources, including articles, podcasts, member stories, and small business advice. And now to this week's episode.

Intro:
Hello and welcome to the CPA Australia Podcast. Your weekly source for accounting, education and career and leadership discussion.

Claire Grayston:
Welcome to the CPA Australia Podcast on the priorities and challenges the International Auditing and Assurance Standard setting, and how the challenges are driving the International Auditing Assurance Standards Boards current projects. I'm Claire Grayston, CPA Australia's policy advisor for audit and assurance. And with me is Tom Seidenstein, the chair of the IAASB and Fiona Campbell, the IAASB deputy chair. Welcome Tom and Fiona.

Fiona Campbell:
Thank you.

Tom Seidenstein:
Thank you. It's great to be here.

Claire Grayston:
So Tom following your first eight months as IAASB chair, what's your overall vision for the IAASB?

Tom Seidenstein:
I think my vision, first of all, you need to know how I'm coming to this role. I firmly believe in the value of the profession in helping to ensure confidence in the market. And that's been a consistent theme of my career. I was with the IFRS foundation from its founding to 2011. I worked as head of strategy at Fannie Mae for seven and a half years before I joined this role. And I came back just the world of standard setting with this idea that I could have a positive impact on the function of the world market. So I come with a mindset that our role is to play an important role in helping to garner trust in the way the profession works and support the effective function markets. Now, our role requires setting high quality standards in the public interest and we're going to do so in a way that is responsive, more agile and highly connected to our stakeholder communities.

Tom Seidenstein:
And we just said our strategy for the next four years, and it really has three major objectives. One is from a standard setting standpoint from our work programme standpoint, can we really focus on the emerging public interest issues and address the major challenges facing audit standards? So this includes, how do we confront advances in technology? How do we confront the issues of complexity? How do we cope with demands on the profession to deal with non-financial information and then there's issues such as going concern and fraud. Can we really turn to that while supporting the existence standards that we've developed over time? Two, can we make standard setting more innovative and agile? I think it's become a little bit of a running joke that standard setters tend to operate at a glacial pace.

Tom Seidenstein:
I don't view that as a preordain event. I think that standard setters could be much more agile and responsive, and we're trying to determine what tools are in our toolkit to make sure that standard setters could come to solutions in a reasonable time period. And then finally, can we work more closely with accounting standard setters, national standard setters and regulators, including inspection regime. So we have this continuous feedback loop. And if we do all of that, people will say that we've created a standard setter that understands what the public demands are and could create standards that the profession, if implemented properly will enhance and build confidence in our reporting system.

Claire Grayston:
Well, it sounds like an ambitious, but the kind of messages that I think the market wants to hear that responsiveness, that agility and that innovation. And so as you say, there's certainly been a lot of talk about how slow things can be at times. So, it's great that you're looking at tackling those things. So you talked about the public interest and absolutely that underlies the motivations for the IAASB and its activities. And I know that the monitoring groups project on reforms to enhance independence, effectiveness and public interest responsiveness of the international order related standards setting has created a lot of uncertainty around standard setting and the IAASB future. Do you have any idea when that's going to be resolved and how in the meantime, as you're managing that uncertainty?

Tom Seidenstein:
Yeah. So let me deal with the timeframe. So as I understand, the monitoring group has two recently appointed co-chairs and they've taken on the comment of the latest views on the previous proposal. And there has been a lot of discussion. I understand amongst the Public Interest Oversight Board, IFAC and a range of stakeholders about where to go next. I would expect that sometime during this year that we'll get a next round of proposals or decisions on what's the next step, but that's really for the monitoring group to determine. In my mind it doesn't change what we're about and I always say to our board, let's control the controllable and create our own destiny. And our destiny is about setting high quality, audit and assurance standards, set in the public interest, well-researched in an independent fashion.

Tom Seidenstein:
Now, I also think which the proposals really hit upon that has to be done with a level of public accountability. And so working with our Public Interest Oversight Board to ensure that we're following our due process, that we're doing the appropriate outreach and that the public interest is being defended at all times. So putting the public interest at the core of what we're doing, and if we do our job, people will be very supportive of the IAASB going ahead and being the right standard set up for the future. Now we could have improvements in the way we operate, a lot of the things that we're dealing with in our strategy about agility and responsiveness actually goes right to what the monitoring group was talking about. So let's control what we can control, but keep the public interest first and keep doing our work and let the monitoring group worry about their work.

Claire Grayston:
Yeah, so it sounds like you're very much trying to deal with changes that you think are necessary to deal with issues that have been raised.

Tom Seidenstein:
Right. And I think that the issues that were raised at the proposals are appropriate that, what's the level of independence and public accountability the board have to take into account? And what's the speed and responsiveness that we need to demonstrate? I think the board has done great work and deserves having the 130 countries around the world that adopt our standards, but we have the ultimate market test too, no one's forced to adopt ISA's. It's a voluntary commitment by jurisdiction. So we have to constantly earn the trust of our stakeholders and jurisdictions and all the things that we're talking about on our strategy are aimed at continually to earn, it's like a daily test for us.

Claire Grayston:
So we hear a lot about the loss of trust in the financial reporting ecosystem as a whole. And so, do you see that to be a role for audit related standard setting in addressing that loss of trust?

Tom Seidenstein:
Well, I think that the issue is the loss of trust, does it happened universally or is there different situations in different jurisdictions throughout the world? There's many signs that are quite positive in terms of financial restatements or down on the amount of findings from that if they are cited down, but at the same time, we are really aware of the dialogue that's happened in this jurisdiction, in the UK and others that there's concern. I take all of them as real important points of information. And then we have to figure out what we're going to do in response. And so, again, our role is where there are deficiencies in the standards over the standards need to continue to improve quality.

Tom Seidenstein:
The IAASB needs to work, but I think also implicit in your question is that we're part of a broader ecosystem and we all have to figure out how we all do our job better because I think expectations light leaf all that we continually improve. So there's clearly a role for standard-setters in this process. Our willingness to take on going concern and fraud, which I think the you term proposals of your parliamentary review highlight is a sign that there's yes, clear standards in responses.

Claire Grayston:
Yeah. And it was interesting. Your first, when you were talking about your vision, you were very much talking about working with the Accounting Standards Board, working with the regulators and trying to, so that feeds into this idea of the ecosystem and how everything connects together and influences each other. So, with that high level of global adoption that you were speaking about the 130 world countries that have adopted or committed to the IAASB standards, do you want to touch on some of the benefits of that consensus and whether there's any threat, I guess, to that threat of perhaps fragmentation going forward.

Tom Seidenstein:
So we believe that global standards make sense. It makes sense in a world at which capital is invested across borders. So, not only are they sure that the transactions are going to be accounted for in similar ways, but they're going to be sured for it in similar ways. And also is to me, if I'm in the profession, I want to have a sense that there's going to be a universal commitment to quality and uniformity of quality across border. So I see those are sort of the two levels of real benefit of having global standard. You talk a little bit about what's at risk, when you talk about fragmentation, now, obviously if countries feel like we're not fulfilling our responsibility, they'll go their own way or if they're responsive to a specific national demands they may so choose to go their own way.

Tom Seidenstein:
That would be regrettable. So we'll do our part by being a responsive standard centre taking on issues of public interest that have global significance. There are going to always be issues that are very local, but when they have global significance we'll act and now the other area where we see fragmentation and I'm sure we'll get to later is on the issue of less complex entities in SMEs, because there's a sense that our standards for some levels are too complex and for national jurisdictions are now considering whether they should adopt a separate set of standards for less complex entities.

Claire Grayston:
Yeah, we'll definitely come back to talk about those less complex entities. So we've talked about a few of the challenges that the IAASB faces or the standard setting and the financial reporting ecosystem faces, are there other challenges that IAASB have identified that you're trying to deal with in standard setting?

Tom Seidenstein:
Well, probably substantive level is, as people start demanding non-financial information as an element of their external report and what's the role of audit and assurance in that area? I think we're obviously taking steps in that regard, but we need to figure out where our role is in that area. Technology, our standards evolving fast enough to meet the rapid technological advances. And then thirdly, which is really an operational issue. How do we within a very limited resource, I think people think of this as a big goal standard setter, and therefore we probably have a tonne of resources. I wish we did, we have a staff of professional staff of 10. So how do we maximise the staff and leverage national standard centres?

Tom Seidenstein:
And of course in Australia, you have a very strong national standard centre, and we're working closely with the Australia and the New Zealand, the Canadian and the Dutch, standard-setters is, can we get a framework in place that we can use national resources to start advancing our research agenda earlier on? So we're ready to go and when our agenda starts to free up, that we can make rapid progress on topics.

Claire Grayston:
Yeah. And we do see a lot of innovation in this part of the world in Australia and in New Zealand in that standard setting space. So yeah, it makes sense to me to be utilising those resources. So Fiona turning to you now, perhaps we can talk a little bit about some of the most recently completed and the projects near completion. So, firstly the exposure draughts for group audit's, I understand that, that project contains some significant shifts in the approach to group audits and I'd be interested in understanding, what those significant changes entail?

Fiona Campbell:
Sure. So I won't spend a lot of time going into the technical detail-

Claire Grayston:
No.

Fiona Campbell:
But essentially, there's been a lot of challenges for a lot of auditors in responding to how their audit clients have decided to structure themselves. This isn't a problem that the auditor's created, this is responding to all the various ways that entities decide to organise themselves through the use of all sorts of shared service centres and other ways for processing transactions. So, this is thinking about what can happen. So identifying the risk of material misstatement, thinking about how and when they could actually occur and designing appropriate responses to those risks and then thinking about by whom and when they could also occur as well and where, it's really getting a focus on the engagement team's responsibility.

Fiona Campbell:
And I know the standard has been around for a long time and it talks about the group engagement team having responsibilities there, but this is really making it clear that it is their responsibility. And then the component team is supplementing that by either having instructions sent to them of certain areas of the group engagement team wants or feeding upwards as well, almost two directional from the component team or the subsidiary that you are auditing up to the group engagement team around what sorts of things that they are seeing in their part of the organisation that the group engagement team might need to be aware of. But it's really trying to focus on getting the right work, by the right people done at the right time and in the right locations. One of the challenges that there's many challenges that the task force has been focused on, but there really is a significant challenge around access to the information. First of all, so where are the transactions being processed, but also access by the auditor's to that information.

Fiona Campbell:
So as a group engagement team, you may not be able to access certain work papers in certain parts of the world. And then obviously regulators have access challenges as well. The standard won't fix all of those problems, but certainly some of the non-authoritative guidance that will come out with the standard is really trying to help address some of those sorts of frequent questions that we get around of what do I do if I can't get access to information? And a prime example of one of the things we've built into the standard, which listeners will say in the exposure draught. It talks about an example being exactly what we're facing in the world at the moment with the Coronavirus, what do you do if nobody can access work papers that are in China at the moment, for example, was that automatically a limitation of scope or are there other ways that you could be accessing information or getting the support you need to be able to form your conclusion?

Fiona Campbell:
So I'm really excited about the exposure draught, I know it won't solve every problem for every person that has these, and I'm certain that there'll be clients that create all sorts of other structures in the future that we're going to have to think about, but we really are trying to future-proof it to be principles based to think about applying those principles irrespective of how a group organises itself for the auditors to then audit.

Claire Grayston:
Stakeholders really need to take a good look at that exposure draught to make sure if they're a component audit or if they're a group auditor that it's reflecting their processes and how they structure those engagements.

Fiona Campbell:
Yes.

Claire Grayston:
So, yeah. We'll be welcoming everyone's input and I'm sure you'll be welcoming our input as well. So I want to ask you Fiona about the standard on risk assessment ISA 315, I realise you were chair of the task force that developed that revised standard. And I'm interested in the challenges that you encountered in relation to the needs of auditor's across the globe conducting such a wide variety of engagement so to put together that standard that can be useful to that wide range of engagement.

Fiona Campbell:
There were certainly lots of challenges. I could take the rest of the podcast to talk about 315 because I love it so much, but I won't. So I'll try and keep my comments brief. If I had to pick the biggest issues that we were focused on as the result of the exposure draught. So once the exposure draught went out, it was really a theme around complexity, scalability, understandability, and the length understandability might not be a word, but the length of the standard, and this is consistent across a number of our standards. So while everyone acknowledges, I need to do an appropriate risk assessment on an audit, what does that look like depending on the size of the entity or the complexity of the entity that I might be auditing?

Fiona Campbell:
So we did spend a lot of time looking at this and trying to come up with some innovative ways to help people access the standard, but also find what they were looking for as quickly as they could. We also spent a significant amount of time trying to answer the question, why? So when there's a requirement, why, why do I care about doing that requirement? If I'm going to do a primarily substantive audit, why do I care about understanding a system of internal control and those five components? Why can't I just jump straight to designing my responses, which is ISA 330? So we built into the standard and the application materials and headings that say, why?

Fiona Campbell:
So for each requirement, when you're going to the application material, it explains the why you need to do it. And we felt very strongly as a task force and the board supported us that, that helps people then understand. Well, if I understand why I can then understand how to scale this application to my particular facts and circumstances. We did also build in some application material around scalability to help people understand scalability for the less complex entities. But we were also asked to provide scalability for the more complex entities, believe it or not. So it's not just about less complex entities struggling with this, but also what would we expect to see if I'm auditing a very large complex listed entity, would I clearly expect them to be more things thought about, but what level of documentation, for example, what sorts of considerations would I do for a larger, more complex entity compared to a less complex entity?

Fiona Campbell:
So almost like bookings in the form of examples or scalability application, material paragraphs. So they're probably the things that I would call out as being the key challenges that we were really trying to focus on when we focused on the risk assessment standards.

Claire Grayston:
Yeah. And as you're saying, did end up a very long standard trying to address all those different needs or be it that you were very much working to make that understandable and relevant to the auditor's of those various entities. But the way innovations that you foresee in terms of making a standard like that accessible to those different sizes of audits.

Fiona Campbell:
There's a number of ways that we can do and I still believe that the standard needs to be principles based. The requirements need to be very clear as to what you are requiring auditors to do. The application material can then go into the why and how you might do it, but probably not much of the, how, that would tend to be outside of a standard. And so we are working through at the moment, finalising some, I call it non-authoritative guidance, but the reality is it'll have our branding on it. So, people will look at it and use it, hopefully in the way it's intended. And one of them is a first time guide. So there's a lot of things in ISA 315, which are a little bit new or different. So significant account balances, classes of transactions and disclosures that's new, significant assertions is new. The definition for significant risks has been changed and enhanced in my view.

Fiona Campbell:
And some of the inherent risk factors are new, all of these things that are new that you really need to understand the first time you apply the standard, we'll have a first time guide, which you can go to really get some more information to help you understand the background to these issues. Why did we end up where we ended up, what would I be expected to do? And you can actually use looser language, if I could say that, I don't mean that in a bad way, but less technical language potentially in something that's not in the standard. So we think that this first time guide will be really helpful for people using ISA 315. It does look like a really long standard, we did move a lot of stuff into appendices. We weren't quite brave enough just to remove stuff.

Fiona Campbell:
We felt that it was still helpful information that if you really did want to know more about internal audit, you got at that appendix, if you wanted to know more about the internal controls that a company would put in place, you'd go to that appendix. But the actual, if you just take the requirements and the application material, it's actually quite a bit shorter than it was. And the challenge we've got is people saying, "Well, the standards are too long, but can you add guidance on this and can you add guidance to here and an example here?" So we really were trying to juggle giving more, but doing it in a way that wasn't overwhelming them, which is why a lot of information is an appendices.

Fiona Campbell:
So if you really don't have a sophisticated IT system at the entity you're auditing, you probably wouldn't look to that particular appendix where it goes into a significant amount of detail of the sorts of risks that might arise from IT.

Claire Grayston:
Yeah. So look auditors haven't another 18 months or more to really understand the standard and get their methodologies aligned. So, and as you say, they go into the areas that are most relevant to them as they're going through that process. So I just want to touch on the post-implementation review of the audit reporting project. It was a significant project which introduce key audit matters, that's probably the one that resonates most loudly for people, but also change the structure of the report and clarified respective responsibilities and so forth. And really with that objective of improving the information value of the auditor's report. So Fiona, if you'd like to comment on the impact that you've seen from the auditor's report.

Fiona Campbell:
Yes. The auditor's reporting implementation working group have spent a lot of time looking at what has been the impact. What's been the adoption rate as well. There's been a timeline, some countries adopting faster than others. So we've had to wait a little bit to be able to see how each jurisdiction has adopted it. And once the jurisdictions have adopted the standard, looking at how did each of those jurisdictions effectively implement it? We certainly noticed in some parts of the world, like the UK, for example, the language being used was really quite creative in some senses, so not the typical audit speak. There are other jurisdictions where they actively worked with the audit firms and the audit partners to try and get them to use language that isn't technical audit jargon.

Fiona Campbell:
So we have seen audit reports that are now written in a way that stakeholders from a ride background could actually read and understand exactly why was something a key audit matter, what the auditors do? I think there's been some interesting observations as well as to, is that enough? Is that going far enough? Are stakeholders expecting us to then also say, and so what, what did we find? What does that mean? Today we've resisted that challenge because the opinion is at the financial statement level, not at the level of each key audit matter, but we have seen one firm who have gone that extra step and then provided findings for each of those key audit matters. So that's something that the group auditor reporting implementation group are looking at is that something that stakeholders are asking for more and more.

Fiona Campbell:
It is interesting that some jurisdictions we felt it flow a little bit under the radar and it wasn't until the second or third year of implementation that analysts and others suddenly realised the audit report was different. I think they had got so used to the habit of just looking for a letterhead and then they moved on that it wasn't until they realised that, that report had changed then some of the questions potentially changed for the directors and others at EGMS and other processes that they have. So I think this is going to be an ongoing thing that we watch. I think it is something we can think about as we reflect on other things that the IAASB can do better moving forward.

Fiona Campbell:
We don't know where going concern and fraud might end up and where those discussions will lead us. But my personal view, I could see where the audit report will be being used for more communication with shareholders rather than less.

Claire Grayston:
Yes.

Fiona Campbell:
And so thinking about non-audit services and other things that the ethical standards board are considering is our audit report going to be a bit of a place for some of these additional communications to live. And that's certainly something that, that auditor reporting implementation group will be looking at as well, moving forward.

Claire Grayston:
And certainly, we see challenges to the traditional role of the auditors report in, for example, the UK inquiries, sobriety suggesting that the auditor can put original information into their report, which hasn't been something that's been envisaged in the past. So there's certainly I guess, there's been innovative ideas coming up and we'll have to see how those play out in the future-

Fiona Campbell:
Yes.

Claire Grayston:
So turning back to you, Tom. I was interested in the IAASB speed's response to the International Forum of Independent Audit Regulators, which obviously conducts the annual inspection findings survey, which reflects regulators in a number of jurisdictions around the world. Whilst it's been improving, I think you mentioned that at the start, they're still describing those as remaining high that the level of findings. So I'm wondering how much you feel that the standard setting is the answer to the shortcomings that the regulators are seeing?

Tom Seidenstein:
So I think when you think about findings coming from IFIAR members, it could think of them in three ways, three buckets of sort of find it as it relates to standards, but some are poor execution of the standard deport implementation of the standards. That is little, we could do very little about that. If the standards are written well, but are not being executed properly then they're going to find it. Then there's a next set of findings that are maybe the standards aren't written well, that they're unclear, need to be improved, or the standards themselves are causing the divergence in application that is an area where we can respond to. And when I went back to the strategy, remember I talked about this closer, tighter knit interaction with the different stakeholders. And if we are in the inspection regimes for being one of them, what we're talking about now is can the IAASB put together a process by which we can make more rapid fire amendments or improvements?

Tom Seidenstein:
If you think about the accounting standards world, this would be a world of IFReC for the IAASB or a world of improve the annual improvements process. Can we have something similar that if we find a lot of inspection findings that the root cause is weaknesses in the standard, can we respond quickly? And then there's another, bucket two is that maybe the findings are due to the consistency of interpretation of our standards. Some of which may be by the re-inspection regimes themselves. Some of it could be just by different divergence of application, and we can either play an educational role or step in from a clarification standpoint as well. So I clearly believe there's a role that we could play. It's just the question of what generated the finding, is it a deficiency in the standards that, that is the root cause?

Claire Grayston:
Yeah, absolutely. So, I see with the quality management project that's one that seems to be responding very directly to improving quality in audit. So, there is the project to revise ISA 220 at the engagement partner level ISQC 1, ISQM 1 at the firm level and ISQM 2, the new standard for the engagement quality control reviews. So, I understand that the challenges and perhaps Fiona, you'd want to talk to this, that stakeholders identifying their responses to those exposure draughts on those standard that they saw some really major changes in the approach to quality management that's in those standards. Perhaps you can give us a little bit of a flavour of the issues which that task force were trying to address in those changes.

Fiona Campbell:
Yes. So the issues that they were really trying to address was to try and move from being a very much a compliance check the box, almost list of procedures that ISQC, which is the existing standard requires you to do. So firms required to have certain policies and procedures in place to cover independence, for example, when you're performing audits. So, there's a bit of a shopping list of things. And the way they came about trying to think about this a little differently was rather than making it all about the quality control. It's about the system of quality management and just changing that one word has had a pretty profound effect on people's thinking of it's about the system of quality management that's put in place by a firm to manage the risks, to audit quality, for example. And so that was their intention behind coming up with understanding what the quality risks a firm might have or have identified, when could those things happen.

Fiona Campbell:
So what could go wrong and when could it happen, putting controls in place to make sure it doesn't happen, or if it does it's identified and rectified, and then obviously testing it and improving. So that sort of cycle around the system of quality management, was driving the thinking of the task force. And the board was certainly very supportive of that direction that we headed. The reactions in the exposure draught, very similar, same song that we hear often sing along if you know the words. It's too complex, it's too long. It's not understandable. How is it scalable? So they have very similar challenges to what we had on ISA 315. And I expect we'll hear some similar things on other standards into the future as well.

Fiona Campbell:
So we have to be thinking about how do we make this scalable in a simple fashion and that it's something that the task force is focused on at the moment. Could they be leveraging something like a first time guide? Could they be using some of the headings and boxes and tables and things that we put into 315, just to help make it a little more readable and accessible for people. But certainly the intention as the standard is very scalable. And it's not meant to be lots of things for everyone. You have to think about your circumstances as an organisation, as a firm. What sorts of engagements are you doing? If you're not performing audits of listed entities ever then ISQM 2 doesn't even fall on your radar, unless you've decided you want to manage quality risk by having an engagement quality partner or an EQA. So you have to think about what's appropriate for my circumstances as a firm, and then design that appropriately.

Fiona Campbell:
I think there's an initial reaction that we are hearing from people as a result of the exposure draught, that this has got so much in it, that small firms are going to struggle to design their system of quality management. And I think the opposite, I think there's actually lots of opportunity for smaller firms to be able to make this scalable and think about what makes sense for the firm that I'm part of and the risks that we have to sort of engagements that we have. But it's very similar issues that most of the standards and task forces at the moment are facing around scalability, complexity, understandability, and length of the standards.

Claire Grayston:
So those three challenges that you spoke about Fiona, perhaps I can turn back to Tom in that, those that scalability, complexity, and length, are those the challenges that you're concerned about for the less complex entities and the project that is underway to address the needs of those less complex entity audits?

Tom Seidenstein:
Yeah, I think that's at the very root in the... Let's take a step back and understand the reality of what we face today, because we face a world for at the top in terms of those who take public funds and have large market capitalizations, could be financial institution. In many ways that world is much more complex than it ever has. It's also the fact that the role of estimates and fair value and all those things make financial reporting much more complex, but then we have a world in which 85% plus of most entities are SMEs. And so, for our board, we don't just deal with one group and not the other we serve all and so how are you going to be able to properly serve the totality? And the issue is process one, I believe that our standards can be written in a less complex route and more scalable in the longterm.

Tom Seidenstein:
And we over time could find ways to do that. But the issue is, today we have a body of standards that national jurisdictions are finding a need to develop a separate set of standards, and we risk fragmentation that we've got in that regard. So what the borders pose is, can you develop a separate standard that ensures that an audit is still the audit? It gives people confidence in the audit, but gets rid of some of the areas that may not be relevant to a less complex, the audit of less complexity entities. And that's the area that we're pushing to get off the fence. And this has been an issue area of study for a long time and the board when we meet in a few weeks and further in June, we hope to have a clear game plan on, and I personally am influenced by the IFRS for the SMEs model.

Tom Seidenstein:
And I saw that work in the IFRS example, it's not perfectly analogous, but I think that's a model I have in my mind. I think we have to be quite clear if we're going to develop a separate standard, who they apply for and who they don't apply for? I think if you take public funds, you're listed on the market, you're publicly traded and you probably have to be in the IFRS. But if you're the mom and pop shoe store at the corner, and you still have a statutory audit requirement, did your auditor need to look at that was in place phages of our standards, maybe not. And what we can do is also find other methods to help auditors have less complex entities that includes the digitization of our standard improved searchability, more examples where necessary, some additional guidance.

Tom Seidenstein:
So what we're committed to as a board is finally to give the public a very clear view of where we're headed on it. And I said, June is the deadline for the board, we're no longer going to endlessly study this issue.

Claire Grayston:
Right. So obviously we'll take a few years assuming the board decides to go down the route of writing of separate standard for the LCES, but you mentioned other innovations like the digitization that could help in the meantime. And I'm curious about the Australian Insurance standards, what I think are initiating a project to trial that digitization. So it'd be interesting to observe that project develop.

Tom Seidenstein:
Yeah. And I had a discussion with the Australia board while during my visit here, and I got to see a prototype it's very much along the lines of what I'm thinking about. I think about a Wikipedia. People always say that standards are too complex because they're so long. No one complains about Wikipedia being too long though it has hundreds and hundreds and hundreds of thousands of pages, why they think it is because you could find what you need. So digitization provides the ability if done properly to help improve the navigability of our standards and allow people to interact with our standards in a way that's not in paper PDF form. It's really difficult to answer a question if you're not an absolute expert at the standard to know where to go, is it on page 1227, or is it on page 632? That's how people are, but people love Google because you could search on Google and find whatever you want on the web, so.

Claire Grayston:
Well, it looks like the day's not far away when we're going to be able to do that more successfully in the standards. So that feeds into what you were saying Fiona, about having information there that everyone needs without finding it overwhelming to actually get through it. So, look very briefly. Just want to get your thoughts about this project on extended external reporting, the guidance that's being developed in that area. Obviously it's a fast developing area of reporting and there's certainly a lot of innovation in terms of integrated reporting, sustainability reporting, emissions reporting and so forth around the globe. So do you think it's far off that we'll see that guidance completed in order that they're available then for assurance on these new areas of reporting. Fiona, perhaps you'd like to comment on that.

Fiona Campbell:
Yeah. I'm not sure I can give you an exact timeline and with your definition is the same as mine. It's not far off, but I would say it's not far off. It's something that we've developed in two phases just to try and get through it because it was a significant amount of work. There are 10 key areas that practitioners tell us they want guidance on. So while I see this as a fabulous piece of guidance, I don't see it as like a standard where you read from start to end. I see this as a little bit more like something you'd dip into and out of depending on what you're looking for. So you might want some help on how you apply materiality. You will pick a particular concept to a particular engagement. So you would dip into it, read that sort of chapter, almost like a textbook.

Fiona Campbell:
You don't read it from start to end, you dip into the chapters you need. And that's where I see this guidance being really helpful, depending on the sort of assurance you're being asked to provide and the sort of engagement you're being asked to provide it on. That allows you to dip in and out of this guidance to find what you're looking for. So again, it's just something we're trying, which is different to having a standard, like ISA 3000, which is really the starting point for most of these engagements, let's try something different. So hopefully there's non-authoritative guidance will be really helpful, but certainly it should be out later this year 2020, that'd be helpful guidance for people as we go down this path.

Claire Grayston:
Fantastic. Well, certainly the IAASB has a massive agenda and we heard what you said at the start, Tom, that you're very much wanting to tackle that agile, responsive, innovative call, if you like in order to meet the public interests. So finally, just in facing the myriad of challenges we've talked about today, government inquiries, regulator inspections, technology, new types of reporting, are there any final words you want to share with us on the IAABS role in all of that and sort of helping the profession through the sort of minefield, I guess, of all those changes?

Tom Seidenstein:
Well, the way you stated it makes the responsibility feel awesome to be an awesome in the world that it's almost overwhelming, but now in reality we think our strategy is a strong one, and that really what we want people to do is hold us accountable to what we are putting in words, in our strategy document and in our work plan. And those are commitments from our standpoint. And if we're successful in fulfilling, executing on the strategy, I think we'll have a set of standards that the public could depend upon and rely upon. And then it really is over to the profession, which I believe is a noble profession, but everyone has to act in good faith with the benefit of their professional judgement , providing the appropriate scepticism to the work.

Tom Seidenstein:
And that is what will make people have more trust in an external reporting. And I think it will make markets work better ultimately. So we're committed to fulfilling our strategy and we hope that the Australian profession actually is an actively engaged on our work. But also I ask the profession to continue to do what should make everyone proud of them.

Claire Grayston:
Yes. Well, thank you, Tom and Fiona. And we'll sort of look forward to continuing to sort of submit on the material that you consult us on and yeah, look forward to an innovative future with the IAASB-

Tom Seidenstein:
Thank you.

Claire Grayston:
Thank you so much, Tom Seidenstein and Fiona Campbell from the IAASB. Thank you.

Fiona Campbell:
Thank you.

Outro:
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