ISA 720 (Revised) — The Auditor's Responsibilities Relating to Other Information: Complete Guide

Key Takeaways

ISA 720 (Revised) requires the auditor to read and consider other information in the annual report — comparing it against both the financial statements and the knowledge obtained during the audit.
Other information includes management commentary, financial highlights, governance reports, operational reviews, and sustainability data — everything in the annual report other than the audited financial statements and the auditor's report.
The auditor does not provide assurance on other information — the responsibilities are reading and consideration procedures, not an audit or review.
The auditor must consider whether there is a material inconsistency between the other information and the financial statements, and between the other information and knowledge obtained in the audit.
A dedicated "Other Information" section is mandatory in every auditor's report where other information has been obtained.
European implementations consistently go beyond ISA 720 by requiring positive reporting on the management report's compliance with legal requirements.
As annual reports expand to include CSRD sustainability statements, the boundary between ISA 720 "other information" and separately assured sustainability information requires careful navigation.

What is ISA 720 (Revised)?

Annual reports contain far more than audited financial statements. Management discussion and analysis, chairman's statements, corporate governance reports, risk overviews, and sustainability narratives all accompany the numbers — and users often read these sections more closely than the financial statements themselves. ISA 720 (Revised) establishes the auditor's responsibilities for this "other information," ensuring that the credibility the audit brings extends beyond the financial statements to the broader annual report.

The revised standard, effective for periods ending on or after 15 December 2016, significantly expanded the auditor's work effort. Where the original ISA 720 focused narrowly on reading for material inconsistencies, the revised version requires auditors to actively compare other information against both the financial statements and the knowledge obtained during the audit — and to report their conclusions in a dedicated section of every auditor's report.

Scope and Definitions

Other information is financial and non-financial information, other than the audited financial statements and the auditor's report thereon, included in an entity's annual report. Common examples include:

Category	Typical Content
Management commentary	Chairman's statement, CEO review, strategy overview, outlook
Financial highlights	Selected financial data, key ratios, five-year summaries
Governance	Corporate governance statement, remuneration report, risk management overview
Operations	Business segment reviews, market and competitive analysis
Sustainability	Environmental data, social responsibility reporting, ESG metrics
Regulatory	Internal control statements, compliance declarations

What is excluded: Securities offering documents such as prospectuses fall outside the scope. The auditor's responsibilities under ISA 720 do not constitute an assurance engagement on other information.

The Auditor's Core Procedures

Obtaining the other information

The auditor must make appropriate arrangements with management to obtain the other information, ideally prior to the date of the auditor's report. Two timing scenarios arise:

Scenario 1 — Obtained before the auditor's report date: The auditor performs all ISA 720 procedures before signing the report. The "Other Information" section in the report addresses the work performed and conclusions reached.

Scenario 2 — Obtained after the auditor's report date: The auditor has no obligation to perform audit procedures on this information but must read it when obtained. If a material inconsistency or material misstatement is identified, the auditor must discuss with management and take appropriate action.

Reading and considering

The auditor must read the other information and, in doing so:

Consider whether there is a material inconsistency between the other information and the financial statements — comparing selected amounts or items.
Consider whether there is a material inconsistency between the other information and the auditor's knowledge obtained in the audit — extending beyond numerical comparison to everything learned about the entity.
Remain alert for other indications that the other information not related to the financial statements or the auditor's knowledge appears to be materially misstated.

The "knowledge lens" — ISA 720's most powerful feature

The most significant aspect of the revised ISA 720 is the "knowledge obtained in the audit" comparison. If you spent weeks understanding the entity's internal controls, revenue recognition policies, and going concern position, you bring that understanding to reading the management commentary. When the CEO's letter describes "strong internal controls" but your audit identified significant deficiencies, that is a material inconsistency that demands attention.

Responding to identified issues

When a material inconsistency appears to exist or other information appears to be materially misstated:

Step 1: Discuss the matter with management and request correction.
Step 2: If management agrees, verify the correction has been made.
Step 3: If management refuses, communicate with those charged with governance.
Step 4: If the matter remains unresolved, consider further actions — including describing the inconsistency in the report, withholding the report, withdrawing from the engagement, or obtaining legal advice.

When the auditor concludes the financial statements need revision (rather than the other information), the auditor follows ISA 560 on subsequent events. If management refuses to revise the financial statements, the auditor modifies the opinion per ISA 705.

Reporting Requirements

ISA 720 (Revised) requires a dedicated "Other Information" section in every auditor's report where other information has been obtained. This section must include:

Identification of the other information obtained at the date of the auditor's report.
A statement that the opinion does not cover the other information and that no assurance conclusion is expressed.
A description of the auditor's responsibilities — reading, considering consistency, and remaining alert.
A statement on the outcome — either "nothing to report" or a description of any uncorrected material inconsistency.

When a material misstatement of the other information exists and has not been corrected, the auditor must describe the uncorrected material misstatement in the "Other Information" section.

Interaction with modified opinions

When the auditor's opinion on the financial statements is qualified or adverse, the "Other Information" section must consider the implications — the matter causing the modification may also affect the other information.

Common Scenarios and Practical Challenges

Revenue figures in the CEO review do not match the income statement. The simplest scenario — a factual inconsistency that should be corrected. Often caused by the annual report being prepared by a different team than the finance department.

Management's commentary is inconsistent with audit findings. For example, the annual report states "we are the market leader" but audit evidence suggests the entity's market share has fallen below competitors. This requires professional judgment about whether the inconsistency is material.

Forward-looking statements are unreasonably optimistic. ISA 720 does not require the auditor to verify future-oriented information, but if projections are inconsistent with the auditor's knowledge (for example, projecting growth while the entity has going concern uncertainties), this warrants discussion with management.

The annual report includes ESG data. Under ISA 720, the auditor must consider these against audit knowledge. However, the auditor is not expected to have specialist ESG knowledge — the standard requires alertness, not verification. Where CSRD assurance applies, separate engagement standards (ISAE 3000 or ISSA 5000) govern that work.

ISA 720 (Revised) in Your Jurisdiction

Netherlands. Dutch law requires auditors to verify consistency of the bestuursverslag (management report) with the financial statements under BW 2:393. This statutory requirement goes beyond ISA 720 — the auditor must specifically report whether the management report has been prepared in accordance with the legal requirements and whether it is consistent with the financial statements. The Dutch auditor's report includes a dedicated section that explicitly states whether it meets the statutory requirements, a level of positive reporting not required by ISA 720 alone.

Germany. The Lagebericht (management report) is a legally required document under HGB §289/§315. IDW PS 350 (revised) requires the auditor to assess whether the Lagebericht is consistent with the financial statements, complies with legal requirements, and does not give a misleading view. The German auditor's report includes a separate opinion on the management report — a positive assurance statement that goes substantially beyond ISA 720's "nothing to report" formulation.

United Kingdom. ISA (UK) 720 layers significant additional requirements driven by the Companies Act 2006. UK auditors must report by exception on whether the strategic report and directors' report are consistent with the financial statements. For PIEs, the extended auditor's report further describes whether the information is fair, balanced, and understandable — a uniquely UK requirement.

France. French auditors have statutory duties regarding the rapport de gestion that predate ISA 720. Under the Code de commerce, the auditor must verify the sincerity and concordance of the management report information with the financial statements. The French auditor's report includes a specific section listing specific verifications performed — a positive reporting obligation.

Frequently Asked Questions

Does the auditor provide assurance on other information?

No. The auditor's responsibilities under ISA 720 do not constitute an assurance engagement on other information. They are reading and consideration procedures — not an audit or review. The auditor's report explicitly states that no assurance conclusion is expressed on the other information.

What happens if the annual report is not available at the report date?

This is common in practice. The auditor reports on other information obtained to date and performs procedures on the remainder when received. The report wording distinguishes between what has and has not been obtained.

Does ISA 720 cover ESG and sustainability data?

Under ISA 720, the auditor must consider sustainability data in the annual report against audit knowledge. However, the auditor is not expected to have specialist ESG knowledge — the standard requires alertness, not verification. Where CSRD assurance applies, separate engagement standards govern that work.

What if management refuses to correct a material inconsistency?

The auditor communicates with those charged with governance. If the matter remains unresolved, the auditor includes a description of the material inconsistency in the "Other Information" section of the auditor's report. The auditor may also consider withholding the report, withdrawing from the engagement, or obtaining legal advice.