Page 206 - Internal Auditing Standards

Guide to Using International Standards on Auditing in the Audits of Small- and Medium-Sized Entities Volume 1—Core Concepts

Paragraph # Relevant Extracts from ISAs
720.14 If, on reading the other information for the purpose of identifying material inconsistencies, the
auditor becomes aware of an apparent material misstatement of fact, the auditor shall discuss
the matter with management. (Ref: Para. A10)

720.15 If, following such discussions, the auditor still considers that there is an apparent material
misstatement of fact, the auditor shall request management to consult with a qualifi ed third
party, such as the entity’s legal counsel, and the auditor shall consider the advice received.
720.16 If the auditor concludes that there is a material misstatement of fact in the other information
which management refuses to correct, the auditor shall notify those charged with governance,
unless all of those charged with governance are involved in managing the entity, of the auditor’s
concern regarding the other information and take any further appropriate action. (Ref: Para. A11)

Overview
Some entities, such as those with many stakeholders, will publish (on paper or electronically) an annual report
or attach some additional information to the audited financial statements. Where this occurs, the auditor has a

responsibility to read the other information to identify any information that could undermine the credibility of

the financial statements and the auditor’s report. Should such information be found, the auditor needs to take
appropriate steps to rectify the situation.

A summary of some of the key requirements is outlined in the exhibit below.
Exhibit 15.9-1

Is “other information” yes
presented with
the F/S?

no
Does a material yes
inconsistency exist
in other information?

no
Does the “other
Do the audited F/S
information”
need to be revised?
need revision?
yes
no
Does management yes
refuse to make
the revision(s)?
no

Notify those charged with governance.
Withhold audit report.
Determine what other actions are appropriate.
Proceed

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