Academic journal article Journal of Accountancy

IFAC Develops Audit Guidance on Accounting for Comparatives

Academic journal article Journal of Accountancy

IFAC Develops Audit Guidance on Accounting for Comparatives

Article excerpt

The International Federation of Accountants issued a standard to help clarify auditors' responsibilities when the financial reporting framework of different countries results in different presentations of comparative financial data. International Standard on Auditing (ISA) 710, Comparatives, acknowledges the two frameworks and methods of presentation--the corresponding figures method and the comparative financial statements method--and it establishes the auditor's responsibilities within each framework, such as how to determine the relevant financial reporting framework and what to include in the audit report. It also lists additional requirements when a different auditor prepares earlier financial statements.

IFAC recognized there had been some misinterpretations of the auditor's responsibilities on comparatives. "There was a need for an international standard because the two methods are quite distinct," said Kenneth Gilmour, secretary of IFAC's International auditing practices committee. "This guidance explains what the auditor should do under each scenario. If an auditor does not at first understand which method was used to prepare the financial statements, the statements could be read incorrectly. …

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