A variety of reporting requirements and voluntary reporting practices exist in South Africa, which may give rise to the inconsistent application of ISA 720 (Revised). The auditor has certain responsibilities under ISA 720 (Revised) when other information has been identified in an entity’s annual report.
To whom does the standard apply?
ISA 720 (Revised) applies to all ISA audits and also affects the audits of non-listed entities. It does not apply to preliminary announcements of financial information or securities offering documents, including prospectuses.
What is considered other information?
ISA 720 (Revised) defines other information as “financial or non-financial information (other than financial statements and the auditor’s report thereon) included in an entity’s annual report. It identifies the scope of other information as information included in an entity’s annual report.
Although the Companies Act, 2008, prescribes the content of a company’s annual financial statements it does not require or address the preparation of an annual report. The JSE Limited Listings Requirements prescribe certain disclosures that should be included in a listed entity’s annual report, but also do not define the annual report.
An entity’s annual report may include information that has been the subject matter of an assurance engagement other than the audit of the financial statements. ISA 720 (Revised) does not contain a scope exemption for such information and it is therefore other information within the scope of ISA 720.
What information is not considered to be other information and excluded from the scope of ISA 720?
Regulatory reports and sustainability reports that are issued as standalone documents, and do not form part of the entity’s annual report, are not part of the combination of documents that comprise an entity’s annual report.
The following is also not regarded as “other information” in the context of ISA 720 and the South African environment:
- Announcements of information that has been reviewed in accordance with the International Standard on Review Engagements (ISRE) 2410, Review of interim financial information performed by the independent auditor of the entity (in the context of entities listed on the JSE).
- Announcements on SENS and/or in the press that relate to information that has been audited or reviewed do not form part of the combination of documents that comprise an annual report.
- Information that a listed entity may prepare on a voluntary basis for a specific stakeholder grouping, such as analysts, has a different purpose from that of an annual report. Where such information are presented separately from the annual report, it is not other information within the scope of ISA 720.
Auditing and reporting of other information
Where the other information was obtained at the date of the auditor’s report
- Identification of the other information obtained prior to the date of the auditor’s report
- In respect of information obtained prior to the date of the auditor’s report, either:
o A statement that the auditor has nothing to report; or
o If there is an uncorrected material misstatement of the other information, a statement that describes the uncorrected material misstatement of the other information
Where the other information is only expected after the date of the auditor’s report
- Listed entities: Identification of the other information expected to be obtained after the date of the auditor’s report
- Entities other than listed entities: No reporting required, although the auditor still has responsibilities to perform the necessary procedures on the other information
The reporting on ‘Other information’ includes the following:
- A statement that that management is responsible for the other information
- A statement that the audit opinion does not cover the other information
- A description of the auditor’s responsibilities relating to reading, considering and reporting on the other information.