Changes and innovation in Audit reports
Audit International, the leading specialists in Internal and External Audit Recruitment across Europe, the US and Asia have learned that Auditors in the UK are responding positively, and in some cases quite innovatively, to the UK’s new auditor reporting requirements. This is the main conclusion of a recent UK Financial Reporting Council report “Extended auditor’s reports: A review of experience in the first year”.
Mentioned report studied 153 audit reports between July and September 2014 that were issued under the new regulations. These regulations sought to make auditor reports more meaningful and less boilerplate, requiring auditors to describe assessed risks of material misstatement, explain their application of materiality and describe the scope of the audit.
Among all reports studied, 63 were for FTSE100 companies and 147 were by the 4 largest audit firms. The range of innovations have included the use of diagrams and graphs, the relocation of the audit opinion and more detailed analysis of risks. The innovations, as well as a few areas where improvement is still needed, especially the provision of entity specific disclosures, are set out in the media release.
The IAASB released similar audit report reforms by earlier this year, reflecting significant calls from stakeholders worldwide for audit reports to be more useful and communicative and these have an implementation date of December 2016. A range of resources, known collectively as the Auditor Reporting toolkit have been published by the IAASB to help practitioners become familiar with the new requirements. They include an “At a glance” summary and an accompanying presentation supporting the new and revised standards.
Analogous reforms are also being considered by the US PCAOB and have been implemented in the EU, with the European Federation of Accountants (FEE) recently issuing a report demonstrating how the EU and new IAASB requirements align.
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