HKSA 720 - Auditors Responsibilities Relating to Other Information (Condensed)

Introduction & Scope (Paragraphs 1-11)

Scope of HKSA 720 (Revised)

Deals with auditor's responsibilities relating to other information (financial or non-financial) included in an entity's annual report.

Exclusions from Scope

• Preliminary announcements of financial information
• Securities offering documents (including prospectuses)

Purpose of the Standard

To ensure the auditor reads and considers other information because material inconsistencies may indicate a misstatement of the financial statements or the other information itself, undermining credibility.

Effective Date

Effective for audits of financial statements for periods ending on or after 15 December 2016.

Objectives (Paragraphs 12-12)

Auditor's Objectives

Having read the other information, the auditor's objectives are:

1. Consider whether there is a material inconsistency between the other information and the financial statements.
2. Consider whether there is a material inconsistency between the other information and the auditor's knowledge obtained in the audit.
3. Respond appropriately when such material inconsistencies appear to exist or when the auditor becomes aware that other information appears to be materially misstated.
4. Report in accordance with this HKSA.

Definitions (Paragraphs 12(a)-12(c))

Annual Report (12(a))

A document (or combination) prepared annually to provide owners with information on operations, financial results, and financial position. It contains or accompanies the financial statements and auditor's report.

Misstatement of the Other Information (12(b))

Exists when the other information is incorrectly stated or otherwise misleading (including omission or obscuring of necessary information).

Other Information (12(c))

Financial or non-financial information (other than financial statements and auditor's report) included in an entity's annual report.

Obtaining the Other Information (Paragraph 13)

Requirements for Obtaining

The auditor shall:

• Determine through discussion with management which document(s) comprise the annual report and the planned manner and timing of issuance.
• Make arrangements to obtain the final version in a timely manner, preferably before the date of the auditor's report.
• Request written representation from management when some documents will not be available until after the auditor's report date, confirming they will provide the final version when available.

Reading & Considering the Other Information (Paragraphs 14-15)

Reading and Considering (14)

The auditor shall read the other information and:

• Consider material inconsistency with the financial statements by comparing selected amounts or items.
• Consider material inconsistency with the auditor's knowledge obtained in the audit.

Alertness for Other Indications (15)

While reading, the auditor shall remain alert for indications that other information not related to the financial statements or auditor's knowledge appears to be materially misstated.

Responding to Misstatements (Paragraphs 16-20)

When a Material Inconsistency Appears to Exist (16)

The auditor shall discuss the matter with management and, if necessary, perform other procedures to conclude whether a material misstatement of the other information or financial statements exists.

When a Material Misstatement Exists (17-19)

• Request management to correct the other information.
• If management refuses, communicate with those charged with governance and request correction.
• If still not corrected, consider implications for the auditor's report or withdrawal from the engagement (where possible).

Post-Report Date Misstatements (19)

If corrected, perform necessary procedures. If not corrected, take appropriate action to bring the matter to users' attention.

Material Misstatement in Financial Statements (20)

If a material misstatement in the financial statements is identified, respond in accordance with other HKSAs.

Reporting (Paragraphs 21-24)

When to Include 'Other Information' Section (21)

The auditor's report shall include a separate section with a heading 'Other Information' when:

• For a listed entity: the auditor has obtained or expects to obtain the other information.
• For an entity other than a listed entity: the auditor has obtained some or all of the other information.

Content of the Section (22)

Must include:

• Statement that management is responsible for the other information.
• Identification of other information obtained (and expected to be obtained for listed entities).
• Statement that the auditor's opinion does not cover the other information.
• Description of the auditor's responsibilities.
• Statement about uncorrected material misstatements, if any.

Modified Opinions (23-24)

When the opinion is qualified or adverse, consider the implications for the statement required in paragraph 22(e). If a disclaimer of opinion is issued, the auditor's report does not include the Other Information section.

Documentation (Paragraph 25)

Documentation Requirements

In addressing HKSA 230, the auditor shall include in the audit documentation:

• Documentation of the procedures performed under this HKSA.
• The final version of the other information on which the auditor has performed the required work.