The International Auditing and Assurance Standards Board (IAASB) is seeking feedback on proposals to make major changes to the way information is communicated in the auditor’s report, in response to widespread criticism in the wake of the global financial crisis about the lack of relevant detail in financial statements, reports Harris & Co Chartered Accountants Northampton.
The IAASB says the aim of the proposals, which are laid out in the Exposure Draft, Reporting on Audited Financial Statements: Proposed New and Revised International Standards on Auditing (ISAs), is to produce more informative audit reports with information which is unique and more specific to the entity that has been audited.
The ED includes a new proposed ISA titled Communicating Key Audit Matters in the Independent Auditor’s Report. This will require auditors of financial statements of listed entities to communicate in their report those matters that, in their professional judgment, were of most significance in the audit of the financial statements.
The IAASB also wants auditors to include specific statements about going concern in their reports, to make an explicit statement about the auditor’s independence from the audited entity and, for listed entities, to disclose the name of the engagement partner in the auditor’s report.
Professor Arnold Schilder, IAASB chairman, said: ‘We expect the proposed new and revised standards will result in substantive changes to how auditors contemplate and approach communication to users of their reports—the beneficiaries of a financial statement audit. These changes are critical to the perceived value of the financial statement audit and thus to the continued relevance of the auditing profession.’
The ED follows from IAASB work including international research, two public consultations and analysis of 165 responses to an exercise on improving the auditor’s report which took place last year.
Schilder said: ‘The signals from these inputs were clear: change is essential. There is support for the IAASB’s direction, and for a global solution. Challenges exist, but they can be overcome.’