Factors giving rise to new Auditing Standards: International Standards on Auditing (ISAs) are produced by the International Auditing and Assurance Standard Board (IAASB), a technical committee of the International Federation of Accountants (IFAC). New International Auditing Standards arise as a result of the following:
1) Response to new legal requirements: When new laws are enacted which have global implications for auditing and assurance practice, the IAASB will review the existing standards to determine whether they can adequately address the new legal requirements. If the existing standards are not adequate, a new standard will be produced to replace the existing inadequate one.

2) Changes in the economic and business environments: Changes are constantly taking place in the economic and business environment. To remain relevant to the business environment, the Standard board on its own initiative or on the prompting of the IFAC governing council produces a new standard to respond to the new demands on the profession. For example, the introduction of ICT into business processes and reporting of financial information electronically required the International Standards on Auditing to guide auditors.
3) Demands from industry players and the general public: Clients and other stakeholders continue to express dissatisfaction about the performance of their external auditors even though some of the demands may be informed by e.g. the expectation gap. To maintain the good will of the client and other stakeholders the board will respond by revising the existing standards or come out with a completely new standard for example the revision on International Standards on Auditing 700/701 to make the auditors’ report on general purpose financial statements more user friendly.
4) Self-introspection: The IFAC council itself may find that an existing standard has become inadequate or irresponsive to the needs of practitioners and their clientele and would initiate action for the standard board to revise the existing standards or produce a completely new standard.                                            (4 points well explained @ 1½ marks each = 6 Marks)

The procedures for developing a new standard:

• When the need arises for a new standard, the standard board is charged by IFAC council to initiate action
• The board will initially review the existing standards to determine its adequacy to address the need. The board may determine that the existing standard should be revised or a new standard should be produced.
• The board then produces an exposure draft.
• The exposure draft is widely circulated to professional accountancy bodies, governments, industry players and regulators for comments.
• The comments received are taken into account in producing a new standard for the attention of the IFAC Council.
• The Council studies the amended draft and suggest improvements which are incorporated.
• The final draft is debated and voted on by the Council.
• The approved version becomes the new standard after a waiting period.          (Any 4 points @ 1 mark each = 4 Marks)