Auditors in Lagos, London and Johannesburg should do the same job in much the same way. International standards make that possible. They tell the auditor what to do, how to judge when the rules are silent, and when a departure is allowed. They also have to be written by someone, and the process of writing them is itself something examiners ask about.
This topic covers how the International Standards on Auditing (ISAs) are set, how standards are set nationally, the main issues that make standard setting hard, how national laws interact with an assurance engagement, the family of International Auditing and Assurance Standards Board (IAASB) standards and what each applies to, the Clarity Project, the main changes made to individual ISAs, the objectives of the auditor under International Standard on Auditing (ISA) 200, and the way different countries regulate audit.
Examiners test the sequence of the process, the issues, and the content of the standards you will meet again in later topics.
In 30 seconds
The IAASB, part of International Federation of Accountants (IFAC), writes the ISAs. A subcommittee drafts an exposure draft, interested parties such as national standard setters and professional bodies comment, the draft is amended and the ISA is issued. Nationally, the steps run from choosing subjects, through study groups, exposure drafts and consultation, to council approval and release.
Four issues make standard setting hard: unclear objectives, a weak board, bias in content and difficulty monitoring use. ISAs cover audits of historical financial information, ISREs reviews, ISAEs other assurance, ISRSs compilations and agreed-upon procedures, and ISQMs quality management for all of them. IAASB standards do not override local law. The Clarity Project redrafted the ISAs so that each states objectives and uses “shall” for requirements.
ISA 200 sets the auditor’s objectives: reasonable assurance that the financial statements are free from material misstatement, and a report.
How ISAs are set internationally
The International Auditing and Assurance Standards Board (IAASB), which is part of the International Federation of Accountants (IFAC), sets the ISAs. When the IAASB decides that a new standard is needed, it asks a subcommittee to write an exposure draft. The draft is then exposed to interested parties, who are invited to comment.
These parties include national standard setters, such as the Auditing Practices Board in the United Kingdom, and professional bodies such as Institute of Chartered Accountants of Nigeria (ICAN). The IAASB reviews the comments and amends the draft as needed. Finally, a new ISA is issued.
How standards are set nationally
At national level the process has six steps, and it can also be described as five stages.
The process
- Identify the subjects on which standards are needed.
- Set up study groups or committees to review the issues in the chosen subject and propose standards. Each section of a proposed standard should include its aim, objectives, the meaning of terms and other key items.
- Compile a draft as an exposure draft for comment by outside bodies and relevant professional groups. The useful feedback is considered when updating the standard so that it meets the needs of different stakeholders.
- Publish the exposure draft for comment by interested groups within a stated period. Updates are made on the facts gathered.
- Present to the council for approval. The council makes sure the report is complete and fits the objectives of the institution.
- Release the standard to the public.
The stages
| Stage | What happens |
|---|---|
| Setting the agenda | Assess how relevant and reliable the needed information is. Consider the available resources, the objectives for setting the standard and any limiting factors |
| Planning and carrying out the project | Decide whether the standard setter works alone or with other interested organisations |
| Developing guidelines | Issue guidelines if they are thought necessary |
| Issuing an exposure draft | Publish drafts for public review and scrutiny, particularly where there are many changes from an earlier standard |
| Consultation meetings | Meet interested parties to learn the likely impact of the proposals. Carry out post-implementation reviews to check that the standards achieve what was intended. The standard-setting body has authority over preparing, reviewing, monitoring and issuing its standards |
The main issues in standard setting
- Objectives and rationale. The objectives may be ambiguous or inconsistent, and the data may be inadequate. Standards then rest on a weak base.
- The standard-setting board. Its governance and structure may be too weak to manage the process. The board must be able to attract committed professionals who will do the rigorous work needed for a robust standard.
- The content of standards and the rules for producing them. The choice of items and the way they are chosen can be affected by bias and power play. This makes consensus hard to reach.
- Monitoring how standards are used. It is hard to check that standards are applied and give the result intended, because change tends to meet resistance.
How national laws and an assurance engagement interact
Assurance engagements take place inside a country’s legal framework, so they must comply with its laws and regulations. Breaking some laws can affect how the entity operates or even whether it can continue as a going concern.
ISA 250 says the practitioner should identify instances of non-compliance with other laws and regulations that may materially affect the financial statements, and respond properly to non-compliance or suspected non-compliance found during the audit.
Local law also gives the auditor extra reporting duties on top of the opinion on the financial statements. The syllabus gives these examples:
- Section 404(2) of Companies and Allied Matters Act 2020 (CAMA 2020) and the Fifth Schedule require the auditor to say expressly whether he has obtained all the information and explanations needed for the audit; whether the company has kept proper books of account, so far as appears from his examination; and whether the statement of financial position and the statement of profit or loss and other comprehensive income agree with the books and returns.
- Central Bank of Nigeria circular BSD/1/2004 required details of insider-related credits to be disclosed in a note to the financial statements.
- The Banks and Other Financial Institutions Act 2020 requires banks to disclose whether they have contravened any section of the Act or any Central Bank of Nigeria (CBN) circular, with details of the contravention and the penalty.
Non-compliance with these laws can lead to sanctions and fines, which can in turn affect the financial statements.
The family of IAASB standards
The IAASB issues more than ISAs. The preface to its pronouncements sets out which standard applies to which engagement.
| Standards | Applied to |
|---|---|
| International Standards on Auditing (ISAs) | The audit of historical financial information |
| International Standards on Review Engagements (ISREs) | The review of historical financial information |
| International Standards on Assurance Engagements (ISAEs) | Assurance engagements other than audits or reviews of historical financial information |
| International Standards on Related Services (ISRSs) | Compilation engagements, agreed-upon procedures on information, and other related services |
| International Standards on Quality Management (ISQMs) | All services carried out under the IAASB’s engagement standards (ISAs, ISREs, ISAEs and ISRSs) |
Besides this preface, certain ISREs, ISAEs, ISRSs and International Standard on Quality Management (ISQM) 1 are examinable in this paper. They are covered in later topics.
Local law comes first
IAASB pronouncements do not override local laws or regulations. If local law differs from or conflicts with IAASB standards, a professional accountant should not state that he has complied with IAASB standards unless he has fully complied with all of the standards relevant to the engagement.
The format and force of the standards
The ISREs, ISAEs and ISRSs follow the format of the original ISAs. Each contains basic principles and essential procedures, marked in bold and with the word “should”, and related guidance in explanatory material and appendices. The basic principles and procedures must be followed. In exceptional circumstances an accountant may judge that a relevant essential procedure should not be followed in order to achieve the objectives.
The accountant must then be ready to justify the departure. The standards also require the accountant to exercise professional judgement in applying them.
The IAASB Clarity Project
The Clarity Project was an 18-month programme to review all the ISAs and the quality control standard comprehensively, so as to make them clearer and the way they are applied more consistent. The IAASB issued its final update in October 2008. The clarified ISAs took effect for audits of financial statements beginning on or after 15 December 2009. Key points are:
- 36 clarified ISAs were issued, with a clarified quality control standard (ISQM 1 in the syllabus’s wording);
- 16 ISAs were substantially revised as well as redrafted, and one new ISA (ISA 265) was issued;
- the other 19 ISAs were redrafted but not revised.
Every clarified ISA gained these improvements:
- the overall objectives of the auditor are identified;
- an objective is set in each ISA;
- the auditor has an obligation in relation to those objectives;
- the obligations are clarified by the requirements and the language used, with “shall” replacing “should”;
- ambiguity about what the auditor must do is removed; and
- each ISA has a new structure with separate sections for introductory material, objectives, definitions, requirements, and application and other explanatory material.
Background: The Clarity Project is now old. Several ISAs have since been revised again, including ISA 315, ISA 540, ISA 220 and ISA 600. Their current rules are covered in the topics on those standards, and where they differ from the summary below, follow the later topic.
The main changes made to individual ISAs
The syllabus summarises the changes to the ISAs that were both redrafted and revised. You will meet each standard in detail later, so use this table to learn what each change added.
| ISA | Main changes |
|---|---|
| 200 Overall objectives of the independent auditor | Sets the auditor’s overall objectives and the nature and scope of an audit. Explains the scope, authority and structure of the ISAs and general responsibilities, including the duty to comply with the ISAs. The auditor uses the objectives in other ISAs to decide whether extra procedures are needed and whether enough appropriate evidence has been obtained. It explains management’s responsibilities, professional scepticism, professional judgement and the inherent limits of an audit |
| 210 Agreeing the terms of audit engagements | The auditor must perform specific procedures to find out whether the preconditions for an audit exist: the financial reporting framework is acceptable, and management confirms that it understands its responsibility for preparing statements under that framework (including a true and fair view), for internal controls that allow statements free from material misstatement, and for giving the auditor access to all relevant information and to employees |
| 260 Communication with those charged with governance | Added requirements to explain why acceptable significant accounting practices may not be the most appropriate, to document matters communicated orally, to communicate significant difficulties met during the audit, and to communicate significant matters discussed with or put in writing to management |
| 265 Communicating deficiencies in internal control (new) | Defines a deficiency in internal control. The auditor must decide whether identified deficiencies are significant, and communicate all significant deficiencies in writing, with a description and their possible effects |
| 320 Materiality | The definition now says materiality depends on the size and nature of an item in the surrounding circumstances. It gives guidance on benchmarks but no formula. The auditor must watch for management bias and consider both uncorrected misstatements and qualitative aspects. New requirements: set a lower performance materiality; revise materiality if later information shows a different level would have been set; and document the thresholds and changes |
| 402 Service organisations | Revised for the growth in service organisations and to match the risk assessment ISAs. It lists what the auditor must understand about the service. If the auditor concludes that controls at the service organisation work, he must test them by getting a Type 2 report, testing controls at the service organisation, or using another auditor. If he plans to use another auditor’s report, he must be satisfied about that auditor’s competence, independence and standards, and decide whether a Type 2 report is enough evidence |
| 450 Evaluation of misstatements (new) | Arose from splitting ISA 320. The auditor accumulates all misstatements except clearly trivial ones, reassesses materiality before evaluating uncorrected misstatements, and decides whether they are material by nature as well as size. Documentation covers the trivial threshold, all accumulated misstatements and whether corrected, and the conclusion on uncorrected misstatements with its basis |
| 505 External confirmations | More rigorous requirements on controlling confirmation requests, on getting more evidence to resolve doubts about the reliability of replies, and on the conditions that must exist before negative confirmations are used |
| 540 Accounting estimates | Revised to increase rigour and scepticism, given the risk of management bias. Gives guidance on what is a misstatement and on indicators of bias, focuses on estimation uncertainty and risk, and fits the audit risk model. The auditor must understand how management identifies and makes estimates, review the outcome of earlier estimates, and assess estimation uncertainty and whether it creates significant risks. For significant risks, he evaluates alternatives considered by management, gets evidence that decisions follow the framework, evaluates disclosure of uncertainty and looks for bias |
| 550 Related parties | Revised after scandals such as Enron and WorldCom in 2002, which often involved related parties, and to be more risk-based. It helps in finding related parties and undisclosed transactions. The auditor considers susceptibility to misstatement from related party dealings, understands controls over them, treats significant related party transactions as significant risks, follows set procedures if undisclosed related parties or transactions are found and for significant transactions outside the normal course, and gets evidence for a claim that a transaction was on normal commercial terms |
| 580 Written representations | Revised because auditors might rely on them too much. Representations are necessary evidence but alone do not give sufficient appropriate evidence on any matter. The auditor obtains representations on management’s responsibility for the framework, for access to information, and for recording all transactions. If management will not give them, the auditor can disclaim an opinion |
| 600 Group audits | More involvement by the group auditor in component auditors’ work. Before accepting, consider whether the group team can be involved enough. Understand the group, its components and the risk of group misstatement, which strong group-wide controls can reduce. Understand the component auditors’ competence and ethics. Set materiality for the group and for components |
| 620 Auditor’s expert | The syllabus lists changes that match ISA 620: it is limited to an expert engaged or employed by the auditor, ISA 500 was amended to cover management’s experts, and procedures are more specific, in particular on agreeing the work and judging whether the expert’s findings are reasonable |
ISA 200: the auditor’s overall objectives
ISA 200 gives the auditor two objectives:
- to obtain reasonable assurance that the financial statements as a whole are free from material misstatement, whether from fraud or error, so as to be able to say whether they are prepared in accordance with the applicable financial reporting framework; and
- to report on the financial statements, and communicate as the ISAs require, in line with what the auditor found.
If the auditor cannot get reasonable assurance and a qualified opinion is not enough, the auditor must disclaim an opinion or resign. Later topics cover the types of opinion. ISA 200 also requires the auditor to:
- comply with all ISAs that are relevant to the audit;
- comply with relevant ethical requirements;
- plan and carry out the audit with professional scepticism;
- use professional judgement in planning and performing the audit; and
- get sufficient appropriate audit evidence to obtain reasonable assurance.
Different jurisdictions: statute-based regimes such as Sarbanes-Oxley
Countries regulate audit in different ways. Some, like the United States, moved towards a formal statute-based corporate governance regime. The Sarbanes-Oxley Act in the United States is the best-known example. The main requirements are:
- the audit committee must approve in advance all audit and non-audit services provided by the external auditor;
- fees for both audit and non-audit services must be fully disclosed to shareholders;
- the auditors must report to the audit committee on any critical accounting policies that management uses; and
- the audit firm is not independent if a senior accounting executive of the client was a member of the audit team within the previous 12 months.
Background: The Act also created a public body, the Public Company Accounting Oversight Board (PCAOB), to oversee auditors of listed companies in the United States.
The ideas in more depth
Why exposure and comment matter
Standards bind professionals who had no hand in writing them. If they were written in private, they could be impractical, one-sided or poorly understood. Exposure gives preparers, users, regulators and auditors the chance to say what will not work. It also gives the standard authority: those who commented can hardly claim it was imposed on them.
The weakness is the one in the syllabus: bias and power play can shape which comments win.
Why local law prevails
An international standard-setting body has no power to make law. A country’s legislature does. So a conflict has to be resolved in favour of local law. The professional rule then protects the integrity of the claim: an auditor may say that the audit followed IAASB standards only if he followed all that were relevant.
A report that said “in accordance with ISAs” after leaving out a required procedure would mislead the reader.
Why “shall” and objectives matter
Under the old wording, “should” left room to argue that a step was optional. “Shall” makes a step a requirement. Each ISA now states its objective, so the auditor can ask whether the objective has been met even if the listed steps have been done. If it has not, the auditor does more work.
This is why ISA 200 lets the auditor use the objectives in other ISAs to decide whether extra procedures are needed.
Numbers: the Clarity Project
The count of clarified ISAs is a favourite fact. Sixteen were revised and redrafted, nineteen were redrafted only and one was new (ISA 265): 16 + 19 + 1 = 36. The quality control standard was clarified as well.
Worked example: a conflict between local law and an ISA
Scenario. Zuma and Co audits a bank in Nigeria. A CBN circular requires the bank to disclose insider-related credits in a note to the financial statements. The firm’s audit manual, which follows an ISA procedure on related parties, does not mention this disclosure, and the audit team did not test it. The partner wants the audit report to say that the audit was done in accordance with ISAs. Advise.
- Issue. Does local law add a requirement that the ISA procedures do not cover, and can the firm claim ISA compliance if it ignores that requirement?
- Rule. IAASB pronouncements do not override local law. Under ISA 250 the auditor must identify non-compliance with laws and regulations that may materially affect the financial statements. A professional accountant may state compliance with IAASB standards only if he has fully complied with all those relevant to the engagement.
- Application. The CBN circular requires a disclosure that is part of the bank’s legal reporting framework. The team did not test it. The firm must carry out the work needed to see whether the disclosure is made and complete, and report on whether the note meets the requirement. Without that work, the firm has not fully complied with the standards relevant to the engagement.
- Conclusion. The firm must do the additional work before it signs. Only then can the report say that the audit followed ISAs. The partner should also tell the audit committee if the disclosure is missing and consider the effect on the opinion.
How to score full marks
- Process questions: use numbered steps in order. Examiners give a mark for each correct step in the right sequence. For the international process: need, subcommittee draft, exposure to interested parties, comments reviewed and draft amended, ISA issued.
- Distinguish the process from the stages. The national process is a six-step chain. The stages are the five phases of agenda, planning, guidelines, exposure and consultation. Do not merge them unless the question does.
- Issues questions: name the issue, then give the consequence. For each of the four issues write one sentence on what goes wrong. A bare list earns half marks.
- Standards family questions: match each standard to its engagement. A table in your answer shows the match quickly. Do not forget ISQMs apply across all of them.
- Conflict questions: state the rule, apply it and conclude. The rule is that local law prevails and compliance can only be claimed if all relevant standards were followed.
- For the Clarity Project, give numbers and improvements. Dates, counts (36, 16, 19, 1) and the six improvements are all easy marks.
- Time. Spend time in proportion to the marks. A 6-mark part should be a short, structured answer of about six points.
Common mistakes in the exam
- Saying that the IAASB is separate from IFAC. It is part of IFAC.
- Mixing up ISREs (reviews) and ISAEs (other assurance) or ISRSs (compilations and agreed-upon procedures).
- Forgetting that ISQMs apply to all services under the IAASB’s engagement standards.
- Saying IAASB standards override local law. They do not.
- Leaving out the exposure and comment step from the standard-setting process.
- Writing “should” as the clarified wording for requirements. The Clarity Project replaced “should” with “shall”.
- Describing performance materiality as a higher amount than materiality. It is lower.
- Saying written representations alone are enough evidence. Under ISA 580 they are not.
Quick revision
- ISAs: IAASB (part of IFAC). Need, subcommittee exposure draft, exposure to interested parties, comments, amendment, issue.
- National process: subjects, study groups, draft, public exposure, council approval, release. Stages: agenda, planning, guidelines, exposure draft, consultation and post-implementation review.
- Four issues: objectives and data, the board, bias in content, monitoring use.
- ISAs: audits. ISREs: reviews. ISAEs: other assurance. ISRSs: compilations and agreed-upon procedures. ISQMs: all.
- Local law prevails. Claim compliance only if all relevant standards followed. Departures from essential procedures must be justified.
- Clarity Project: 18 months; 36 ISAs (16 revised, 19 redrafted, 1 new); effective for periods starting on or after 15 December 2009; objectives, “shall”, new structure.
- ISA 200 objectives: reasonable assurance and reporting; comply with ISAs and ethics, use scepticism and judgement, get sufficient appropriate evidence.
- Sarbanes-Oxley: audit committee pre-approves services, fee disclosure, report on critical accounting policies, 12-month cooling-off for senior accounting executives.
Practice questions
These are original questions written in the style of the ICAN exam. Try each one before you open the answer. Full model answers follow the written questions.
Recall check: multiple choice
The real ICAN paper has no multiple-choice section. These questions are for quick recall. The written questions that follow are closer to the exam.
Question 1. The International Standards on Auditing are set by the:
- Financial Reporting Council of Nigeria
- IAASB, which is part of IFAC
- International Financial Reporting Standards (IFRS) Foundation
- ICAN Council
Show the answer
B. The IAASB is part of IFAC.
Question 2. International Standards on Review Engagements apply to:
- The audit of historical financial information
- The review of historical financial information
- Compilation engagements
- Quality management of firms
Show the answer
B. ISAs cover audits, ISRSs cover compilations, and ISQMs cover quality management.
Question 3. An engagement to examine prospective financial information falls under:
- ISAs
- ISREs
- ISAEs
- ISRSs
Show the answer
C. It is an assurance engagement other than an audit or review of historical financial information.
Question 4. Which new ISA was issued as part of the Clarity Project?
- ISA 200
- ISA 265
- ISA 320
- ISA 540
Show the answer
B. ISA 265 on communicating deficiencies in internal control. ISA 450 was also created from ISA 320 as a separate ISA in the revision of materiality.
Question 5. In the clarified ISAs, the language that sets a requirement is:
- “May”
- “Should”
- “Shall”
- “Could”
Show the answer
C. “Shall” replaced “should” to remove ambiguity.
Question 6. Where local law conflicts with IAASB standards, a professional accountant:
- Must follow the IAASB standards and ignore the law
- Should not state compliance with IAASB standards unless he has fully complied with all relevant standards
- May state compliance whatever he did
- Must resign
Show the answer
B. IAASB pronouncements do not override local law.
Question 7. The lower amount that revised ISA 320 requires the auditor to set for assessing risk and choosing procedures is:
- Overall materiality
- Clearly trivial threshold
- Performance materiality
- Tolerable error in a sample
Show the answer
C. Performance materiality is set below materiality for the financial statements as a whole.
Question 8. Under revised ISA 580, written representations from management:
- Are enough on their own to support any assertion
- Are necessary evidence but alone are not sufficient appropriate evidence
- Replace the need for audit procedures
- Are optional on management’s responsibilities
Show the answer
B. The revision responded to over-reliance on representations.
Question 9. Which one of the following is a major issue in standard setting identified in the syllabus?
- The standards are always too short
- Bias and power play in choosing the content of standards
- Too many professionals volunteer to serve
- Standards are never reviewed
Show the answer
B. Bias and power play can make consensus hard to reach.
Question 10. The Clarity Project produced 36 clarified ISAs. Of these, 16 were revised and redrafted and one was new. How many were redrafted only?
- 16
- 17
- 19
- 20
Show the answer
C. 36 − 16 − 1 = 19.
Written questions
Question 11 (10 marks). Describe the process of setting standards at national level, and explain the major issues in standard setting.
Question 12 (20 marks). (a) Explain how International Standards on Auditing are set by the IAASB. (4 marks) (b) State the standards the IAASB issues other than ISAs, and the engagements to which each applies. (6 marks) (c) Describe the improvements the Clarity Project brought to the ISAs. (6 marks) (d) State the overall objectives of the auditor under ISA 200 and the requirements it places on the auditor. (4 marks)
Question 13 (10 marks). A national standard-setting body plans a new auditing standard. Its objectives are vague and the data it holds are thin. Its board has few technical staff and struggles to attract committed volunteers. Large firms are pressing for rules that favour them, and no one has planned how the use of the standard will be checked.
(a) Set out the process the body should follow from the start of the project to the release of the standard. (5 marks) (b) Explain the problems the facts show and how each could harm the standard. (5 marks)
Model answers
Show the model answer to Question 11
The national process. First, the standard setter identifies the subjects on which standards are needed. (1) Second, it sets up study groups or committees to review the issues and propose standards, each section including aim, objectives and definitions. (1) Third, it compiles a draft as an exposure draft for comment by outside bodies, and takes account of useful feedback.
(1) Fourth, the draft is published for public comment within a stated period, and changes are made on the facts gathered. (1) Fifth, it is presented to the council, which makes sure it is complete and in line with the institution’s objectives. (1) Sixth, it is released to the public. (1)
Major issues. Objectives and data: objectives may be ambiguous or inconsistent and data inadequate. (1) The board: its governance and structure may be too weak to run the process, and it must attract committed professionals. (1) Content: the choice of items and the procedure for choosing them may be affected by bias and power play, making consensus hard.
(1) Monitoring: it is hard to ensure standards are used and give the intended result, because change meets resistance. (1)
Show the model answer to Question 12
(a) How ISAs are set (4 marks). The IAASB, part of IFAC, decides a new standard is needed and asks a subcommittee to write an exposure draft (1.5). The draft is exposed to interested parties, such as national standard setters and professional bodies like ICAN, who comment (1). The IAASB reviews the comments and amends the draft (1), and then issues the ISA (0.5).
(b) Other standards (6 marks). ISREs apply to reviews of historical financial information (1.5). ISAEs apply to assurance engagements other than audits or reviews of historical financial information (1.5). ISRSs apply to compilations, agreed-upon procedures and other related services (1.5). ISQMs apply to all services under the IAASB’s engagement standards (ISAs, ISREs, ISAEs and ISRSs) (1.5).
(c) Clarity Project improvements (6 marks). It identified the auditor’s overall objectives (1); set an objective in each ISA (1); placed an obligation on the auditor in relation to those objectives (1); clarified the obligations through the requirements and language, replacing “should” with “shall” (1); removed ambiguity about what must be done (1); and gave each ISA a structure of introduction, objectives, definitions, requirements and application and explanatory material (1).
(d) ISA 200 (4 marks). Objectives: to obtain reasonable assurance that the financial statements as a whole are free from material misstatement, whether from fraud or error, so that an opinion can be given on the framework (1); and to report on the financial statements and communicate as the ISAs require (1). Requirements: comply with relevant ISAs and ethical requirements (1); plan and perform with professional scepticism and judgement, and get sufficient appropriate evidence (1).
Show the model answer to Question 13
(a) The process (5 marks). It should identify the subject for which a standard is needed (1); set up a study group or committee to review the issues and propose a standard, with the aim, objectives and definitions in each section (1); compile an exposure draft for comment by outside bodies and professional groups (1); publish the draft for public comment within a stated period and update it on the facts gathered (1); and present it to the council for approval and then release it to the public (1).
(b) The problems (5 marks). Unclear objectives and thin data: the standard would rest on a weak base and be ambiguous or inconsistent (1.5). A weak board: without technical staff and committed professionals, the rigorous work needed for a robust standard will not be done (1.5). Pressure from large firms: bias and power play in choosing the content makes consensus hard and the rules unfair (1).
No monitoring plan: nobody can tell whether the standard is applied or achieves its purpose, and change meets resistance (1).
Pathfinder on professional standards and standard setting
These are the ICAN Pathfinder questions that test this topic. ICAN owns the questions and the suggested solutions, so we point you to them and do not copy them. Open your Pathfinder, attempt each question under exam conditions, then check your answer against the notes above.
No written question in these two diets tests this topic on its own. The scenario questions can still draw on it inside other answers.
Revise first: Quick revision
Section A is a single compulsory case with several requirements. It has drawn on ethics, quality management, group audits and reporting. Practise the scenario method in this topic before you attempt it.
Revise first: How to score full marks
Source: ICAN Pathfinder, Advanced Audit, Assurance and Forensics. Diets covered: May Diet, 2026 and November Diet, 2025.
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