How do international Reporting standards (IFRS) differ from international standards on Auditing (ISA) ?

Answer 1

International Financial Reporting Standards (IFRS) and International Standards on Auditing (ISA) are both sets of standards developed by the International Accounting Standards Board (IASB) and International Auditing and Assurance Standards Board (IAASB) respectively. While they are related, they have distinct differences as explained below:

1. Purpose and Scope:
- IFRS: IFRS provide guidelines for preparation and presentation of financial statements. They focus on how financial information should be reported in the statements to ensure comparability and transparency.
- ISA: ISA provide guidelines for auditors in planning, executing, and reporting on financial statement audits. They focus on the procedures and requirements that auditors should follow to obtain reasonable assurance about the financial statements.

2. Users:
- IFRS: IFRS are primarily used by preparers of financial statements, including publicly traded companies, to ensure consistency and comparability in reporting financial performance.
- ISA: ISA are primarily used by auditors to guide them in conducting audits of financial statements to evaluate their fairness, compliance with applicable standards, and the presence of any material misstatements.

3. Subject Matter:
- IFRS: IFRS cover the overall financial reporting framework, including recognition, measurement, presentation, and disclosure of financial information.
- ISA: ISA cover the specific procedures, responsibilities, and ethical considerations that auditors should follow to plan, execute, and report on financial statement audits.

4. Application:
- IFRS: IFRS are applied by companies in their financial reporting, either voluntarily or mandated by regulatory authorities.
- ISA: ISA are applied by auditors when conducting audits of financial statements, either voluntarily or mandated by regulatory authorities.

5. Updates and Changes:
- IFRS: IFRS are regularly updated and revised by the IASB to reflect changes in accounting practices and to respond to emerging issues.
- ISA: ISA are also updated by the IAASB to align with changes in auditing practices, emerging risks, and advancements in technology.

In summary, while IFRS primarily focus on the preparation and presentation of financial statements, ISA provide guidelines to auditors for conducting audits of those financial statements. Both sets of standards contribute to the overall goal of improving the quality and reliability of financial reporting.