new audit report double edged sword?

The New Auditor Report - A Double-

Edged Sword?

8 December 2016

The New Auditor Report - A Double-Edged Sword?

• Auditors are required to give an opinion on the overall fairness of the financial statements

• There is more beneath the audit report

• The new auditor report aims to surface more relevant information to the readers

Audit report is just a tip of an iceberg


• Has the new standard gone far enough to ensure the intended outcomes meet the expectations it sets?

• What are the chances of “Rolls Royce” audit report to be the norm?

• Where IAASB standard differ from the UK standard? Why?

Would the outcomes meet the expectations

set?


• Would the new format and additional disclosure provide meaningful information which enable shareholders and other to make better decisions?

• Information overload? More information to digest? Whether the issues raised really matter?

• Would the board’s response to key issues raised sufficient?

• Would shareholders ask more questions at AGMs?

How would the stakeholders react to more discussions in the

audit report?


• Would every firm be able to craft reports which are meaningful and easily understood?

• Need advanced planning and waiting till the end of the audit would not be helpful

• Partners need to be more involved, internalise issues and report more substance rather than conforming to form

• How fast this would results in boiler platers?

Can the auditors deliver?


• Regulators have been very facilitative on the implementation of the new auditor reporting standards

• Would they adopt the soft approach for the initial period of implementation?

• The FRC in the UK for example has been very forthcoming in promoting the new standards including publishing their observations

How would the regulators react?


• Would significant key audit matters influence the share price when appearing for the first time?

• Does it indicate the quality of governance of the company, especially recurring issues?

• Would judgmental issues be sufficiently explained to ensure the readers understand the context?

• Increasing risks of legal action by third party?

What if the sword swings back towards the board?


• Your auditors should have explained to your how the new auditor report will work and affect your companies

• The draft report based on prior years’ issues would have been presented to the audit committee to provide the feel of what would be coming your way

• Key audit issues for the present financial year would have been identified and their effect on the auditor report be assessed

• Issues which are highly judgmental would be candidates for the key audit matters

What should have happened by now?


• The new auditor reporting attempts to provide readers of audit report with more insights about the audit and what were the key judgment areas and going concern

• Expect differences of approaches by audit firms at the initial stages, the reaction from stakeholders would be critical

• Audit committees should take this issue seriously, along with other pressing matters which may cause this new standards to be overlooked

• The auditing profession has the duty to make this work rather than be creative in retaining status quo is a different form

Moving forward

new audit report double edged sword?

Business