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

Why ISA 720 matters

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. Users often read these sections more closely than the financial statements themselves. ISA 720 (Revised) establishes the auditor’s responsibilities for this “other information,” so the credibility the audit brings extends beyond the FS 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 compared to its predecessor. Where the original ISA 720 focused narrowly on reading for material inconsistencies, the revised version requires auditors to actively compare OI against both the FS 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 FS and the auditor’s report thereon, included in an entity’s annual report. Common examples include:

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 OI. They are reading and consideration procedures, not an audit or review.

Annual report definition

An annual report is typically a document prepared on an annual basis required by law, regulation, or custom, intended to provide stakeholders with information on the entity’s operations and financial position. The definition is deliberately broad, recognising that the form and content of annual reports vary significantly across jurisdictions.

The auditor’s core procedures

Obtaining the other information

The auditor must make appropriate arrangements with management to obtain the OI, ideally prior to the date of the auditor’s report. The engagement letter (EL) should include an agreement that management will provide the OI in a timely manner.

Two timing scenarios arise.

Scenario 1: other information 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: other information 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, determine whether the FS or OI need revision, and take appropriate action (which may include notifying governance or considering implications for the engagement).

Reading and considering

The auditor must read the OI and, in doing so, do three things.

First, consider whether there is a material inconsistency between the OI and the FS. This involves comparing selected amounts or items in the OI with corresponding amounts or items in the FS.

Second, consider whether there is a material inconsistency between the OI and the auditor’s knowledge obtained in the audit. This extends beyond numerical comparison. The auditor draws on everything learned about the entity, its environment, and the audit findings.

Third, remain alert for other indications that the OI not related to the FS or the auditor’s knowledge appears to be materially misstated. This catches factual errors in areas outside the auditor’s expertise, such as incorrect descriptions of the entity’s history or market position.

The strongest part 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, impairment assumptions, 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. On about half the engagements I’ve seen, this step becomes a tick box exercise. The file should tell a story about what you compared and what you concluded.

Responding to identified issues

When a material inconsistency appears to exist or OI appears to be materially misstated, the auditor follows a four-step process.

Further actions when management refuses to correct

Options include including a description of the material inconsistency in the “Other Information” section of the auditor’s report, withholding the auditor’s report (where legally possible), withdrawing from the engagement (where legally possible and appropriate), and obtaining legal advice.

When the auditor concludes the financial statements need revision

Where the FS rather than the OI are wrong, the auditor follows ISA 560 on subsequent events. If management refuses to revise the FS, 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 OI has been obtained. This section must include four elements.

1. Identification of the OI obtained at the date of the auditor’s report
2. A statement that the opinion does not cover the OI and that no assurance conclusion is expressed
3. A description of the auditor’s responsibilities (reading, considering consistency with the FS, considering consistency with audit knowledge, and remaining alert for other misstatements)
4. A statement on the outcome, either “nothing to report” or a description of any uncorrected material inconsistency

When the auditor has obtained all OI prior to the report date and identified no material inconsistency, the standard wording concludes: “We have nothing to report in this regard.”

When a material misstatement of the OI 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 FS is qualified or adverse, the “Other Information” section must consider the implications for the OI. The matter causing the modification may also affect the OI. The auditor evaluates whether the OI is affected to the equivalent extent.

Common scenarios and practical challenges

Revenue figures in the CEO review do not match the income statement

This is the simplest scenario. A factual inconsistency that should be corrected. Often caused by the annual report being prepared by a different team (communications or investor relations) than the finance department.

Management’s commentary on market position is inconsistent with audit findings

An example. The annual report states “we are the market leader in the Netherlands” 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 of the entity’s financial position (for example, projecting growth while the entity has going concern uncertainties), this warrants discussion with management.

The annual report includes ESG data

With increasing sustainability reporting, OI now frequently includes carbon emissions data, diversity statistics, and governance metrics. Under ISA 720, the auditor must consider these against audit knowledge. 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.

The annual report is not available at the report date

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

European jurisdiction implementations

Netherlands

Dutch law requires auditors to verify consistency of the bestuursverslag (management report) with the FS under Title 9, Book 2 of the Dutch Civil Code (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 FS. NBA Standard 700 prescribes the specific report wording. The Dutch auditor’s report includes a dedicated section on the management report that explicitly states whether it meets the statutory requirements, a level of positive reporting not required by ISA 720 alone. With the introduction of CSRD, the scope of “other information” in Dutch annual reports is expanding significantly to include sustainability statements prepared under ESRS.

Germany

The Lagebericht (management report) is a legally required document under HGB §289/§315 with detailed content requirements covering the entity’s business development, position, expected development, and risks. IDW PS 350 (revised) provides German auditors with specific guidance on verifying the management report, requiring the auditor to assess whether the Lagebericht is consistent with the FS, complies with legal requirements, presents the expected development appropriately, and does not give a misleading view. The German auditor’s report includes a separate opinion on the management report. This is a positive assurance statement that goes substantially beyond ISA 720’s “nothing to report” formulation. The Prüfungsbericht (long-form report) to the supervisory board contains detailed findings on the management report. For corporate groups, the Konzernlagebericht requires the same level of scrutiny.

United Kingdom

ISA (UK) 720 incorporates the international standard but 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 FS and have been prepared in accordance with applicable legal requirements. For quoted companies, the auditor must also report on specific parts of the directors’ remuneration report. The UK report includes explicit statements on whether information in the strategic report and directors’ report is “in agreement with the accounting records.” For PIEs, the extended auditor’s report under ISA (UK) 700 further describes the auditor’s assessment of the annual report, including whether the information is fair, balanced, and understandable. This is a uniquely UK requirement that makes the auditor’s engagement with OI substantially more rigorous than the base ISA.

France

French auditors (commissaires aux comptes) have statutory duties regarding the rapport de gestion (management report) that predate ISA 720. Under the Code de commerce (L.823-10), the auditor must verify the sincerity and concordance of the management report information with the FS. The French auditor’s report includes a specific section on the management report that lists specific verifications performed. This is a positive reporting obligation. NEP 9510 governs the auditor’s work on OI. The French concept of observations also allows the auditor to draw attention to matters in the annual report that merit users’ attention. Under CSRD implementation via the French ordonnance transposing the directive, the scope of verifications on sustainability information in the management report is expanding, with the commissaire aux comptes or an independent third party (organisme tiers indépendant, OTI) performing limited assurance.

Relationship with other standards

ISA 720 interacts extensively with the reporting cluster:

• ISA 700: The “Other Information” section is a mandatory element of the auditor’s report structure.
• ISA 705: A modified opinion may have implications for the OI reporting.
• ISA 706: EOM paragraphs may relate to matters also discussed in OI.
• ISA 570: Going concern disclosures in the management report must be consistent with FS disclosures.
• ISA 560: If reading OI reveals a subsequent event requiring FS revision.
• ISA 315: The entity understanding obtained provides the “knowledge base” for ISA 720 procedures.
• ISAE 3000/ISSA 5000: Where sustainability information in the annual report is subject to separate assurance, the ISA 720 procedures and the assurance engagement are distinct but may inform each other.

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Frequently asked questions

Further reading and source references

• IAASB Handbook 2024: The authoritative source for the complete ISA 720 (Revised) text.
• ISA 700 (Revised): The "Other Information" section is a mandatory element of the auditor's report structure.
• ISA 705 (Revised): A modified opinion may have implications for the other information reporting.
• ISA 570 (Revised): Going concern disclosures in the management report must be consistent with financial statement disclosures.
• ISA 560: If reading other information reveals a subsequent event requiring financial statement revision.