the audit report -me

7/25/2019 The Audit Report -Me

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THE AUDIT REPORT


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Summary

Literature review

Types of audit reports and respective new

ISAs Case study

Key audit matters

Going concern

Other changes to the audit report


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Literature review

The audit report:

lengthy history

su!ect to change over time and acrossnations

informational value for users and impact on

users decisionschanges could increase its worth


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"ar#et research in auditing

Sample of Spanish listed firms $ %ualified

opinion and un%ualified opinion &' returns

did not differ &' %ualified audit report did

not provide relevant information to

investors


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Types of audit reports

unmodified report * ISA +,,

modified report* with emphasis of matter -when the financial statements

show a true and fair view ut there is something thatneeds to e rought to the atention of the user y an

additional paragraph. * ISA +,/

* with modified opinion -when the financial statements do

not fuly show a true and fair view or the auditor has not

otained suffient appropriate evidence to ma#e aconclusion. * ISA +,0


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CASE STUDY

1oundation of gloal auditor reporting

Improved auditor $ management

communication 2ssential to the continued relevance of the

audit profession gloally3Audit is valued ut could e more informative

3 4sers want more relevant information aout the

entity and the financial statement audit

5hy change the audit report now6


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2)pected enefits of the new

auditor7s report 2nhanced communication among auditors8

investors and those charged with governance

-TC5G.9

Increased attention y management todisclosures in the financial statements9

Increased focus of the auditor on matters that

need to e disclosed9

Increased audit %uality or user7s perception of

audit %uality:


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"ain changes to the auditor7s

report Key audit matters

Going concern

Other changes

Effective Date: Audits of financial

statements for periods ending on;ecemer


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5hat are the #ey audit matters

-KA"s.6

those matters that in the auditor7s

professional !udgement were of mostsignificance in the audit of the financial

statements of the current period9


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;escription of a KA"

5hy the matter was considered to e one

of most significance in the audit and

therefore determined to e a KA"9

?ow the matter was addressed in the

audit9 and

@eference to the related disclosure-s.:


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No. Source Stakeholder

class

Support the

introduction

of KAM

Additional comments

1 PWC Accounting

firm

Yes - the reporting of key audit matters should achieve:

insight that is relevant to users understanding of the financial statements

focuss on the most significant matters!

2 "P#$ Accounting

firm

Yes - %We are not supportive of including original information a&out an

entity in the auditors description of a "A# &ecause it is the role of

management and those charged 'ith governance to provide information

a&out the entity to users!(

- )AA*+ should clarify that an auditor is not re,uired to communicate a"A# 'hen he is precluded from reporting the matter &y la's regulations

or other professional standards!

3 .eloitte Accounting

firm

Yes - it 'ill enhance the usefulness of the auditors report &ecause responds to

the call from users of the auditors report for more transparency more

meaningful and useful information!

4 /Y Accountingfirm Yes %descri&ing "A#s 'ill enhance the usefulness of the auditors reportthrough providing greater transparency into important areas 'here the

auditor devoted the most time and attention and had su&stantive

discussions 'ith those charged 'ith governance!(


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class

Support the

introduction of

KAM

Additional comments

5 ACCA #em&er +ody Yes %'e support the concept &ecause it is a focused to meet the

diverse demands of stakeholders particularly institutional

investors and financial analysts!(

6 0AP -

0ederation

of

Accounting

Professions

hailand

2ational

Auditing

*tandard

*etter

Yes - this ne' section could add value to the audit opinion and

helps increase the pu&lics trust in the audit

- users may not &e a&le to find information relevant to their

economic decisions due to information overload!

7 /A)$ 3

/uropean

Audit

)nspection

$roup

4egulator Yes %)t provides a positive incentive for management to enhance

the ,uality of information disclosed!(


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Conclusions regarding KA"

One of the most important changes9

5ill improve the utility of the auditor7s report y delivering higher clearness into important areas

where the auditor spent most time and consideration9

"ay e challenges in revealing the information -misunderstandings with the customers aout

what #ey audit matters to comprise in the report of audit8 the customers might motivate that

information is sensitive and conse%uently8 the !eopardy of shading the role of the auditor and the

role of management is high. investors might fiind out aout the ris#s the company faces if the auditor comments on some #ey

audit matters8 which could have unforeseen mar#et conse%uences

communication of original information regarding a company might lead to reaches in

confidentiality:

There are also concerns aout the fact that the auditor will have the tendency of reporting the

same issues one year after another:

the e)pected increase in efforts and costs associated with such reporting:


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Conclusions regarding KA" *

cont: prolems li#e auditors eing pulicly challenged for their decisions8

auditors overcomment for fear of not reporting

there is the view that generally sta#eholders prefer a simple certification that an audit has een

conducted to estalished standards8 rather than a longer audit report:

as long as some users support the fact that these KA"s should e presented only for listed

companies8 others wonder why8 if they are re%uirements appreciated as est pra)is8 are not

demanded for all companies8 rather than eing limited to listed companies this new part in the report of audit could lead to some difficulties due to information overload: In

addition8 some sta#eholders may not e ale to find information relevant to their economic

decisions:


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Going concern

5hen it is determined that management7s utilisation of going concern

asis of accounting is appropriate there are four road conclusions that

can e reached y the auditor if material uncertainty e)ists>

=:no uncertainty e)ists9


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Going concern $ cont

The first8 the third and the forth scenarios matters should

e disclosed in the going concern part of the report of

the auditor or in the asis of opinion8 in particular

situations:

The second scenario may represent a #ey audit matter:


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class

Support the

introduction

of G

Additional comments

4 /Y Accounting

firm

Yes %We are concerned that the suggested conclusions 9i!e! 5'e have

concluded that managements use of the going concern &asis ofaccounting in the preparation of the financial statements is

appropriate( and 5'e also have not identified such a material

uncertainty( could result in misunderstanding or confusion &y

users! hey may misinterpret a statement as e6pressing more than

simply a conclusion on the &asis of accounting used to prepare the

financial statements!(

5 ACCA #em&er

+ody

Yes %here is potential for user misunderstanding &ut this is not an

insurmounta&le pro&lem! )t should &e addressed &y education of

and communication 'ith users! he )AA*+ should &e prepared to

take a lead in such matters!(

6 0AP -

0ederation of

AccountingProfessions

hailand

2ational

Auditing

*tandard*etter

Yes %We understand that the users may not &e a'are ho' long of the

period of assurance is! ;ence 'e suggest that the )AA*+ adds

some information regarding the period covered &y the goingconcern matters mention in the auditors report for identification of

material uncertainty 91< months from the financial reporting date!(

7 /A)$ 3

/uropean

Audit

)nspection

$roup

4egulator Yes %We agree that the auditor can only report on the facts that have

&een identified during the audit and cannot provide a guarantee on

the outcome of future events! A statement on inherent limitations

regarding future developments and events could &e helpful to users

in this regard!(


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Conclusions regarding GC

Is a etter encountering of the needs of the sta#eholders

some users do not thin# that the auditors should e the authentic providers of

information aout going concern matters:

The statements are open to mis!udgements and also confusing for the sta#eholders

which are not very informed8 especially regarding material incertitudes: Certainly8 user

misunderstanding is not an overwhelming prolem: It should e addressed y

education and communication with users8

in the present the management is not demanded under I1@S to ma#e a precise

afirmation that it has prepared the financial statements on the asis of going

concern: The auditors thin# that this may mislead sta#eholders regarding the roles of

the auditor and the management regarding going concern:

"oreover8 certain auditors thin# that the re%uests will increase the cost of the audit

due to the fact that preapring precise statements in the report of the auditor willre%uire the implication of senior audit staff and %uality control reviewers:


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Other changes

the opinion of the auditor re%uested to e presented first

statement regarding independence and other ethical

duties

naming the engagement partner -listed entities only. enhanced description of auditor responsiilities and

asic characteristics of the audit

re%uired identification section when those charged with

governance are separate from management


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1inal conclusions

the modifications rought to the reporting audit should oost the %uality of audit8 improve the audit worth to

sta#eholders and enhance the accuracy of disclosures the company supplies in the pulic reports:

improve the efficiency of the cooperation etween those charged with governance8 auditors and

management in the reporting of financial statements proceedings

the supplementary disclosures from the report of audit are going to e efficient if they do not create

misunderstandings which might discredit the trust in the audit:

the sta#eholders elieve that the new audit report is oth more understandale and of greater value than

the old report8 the foreseen results are encouraging: there are oth advantages and disadvantages rgarding the improved audit report8 ut in the end8 the

advantages prevail

the communication etween auditors and users of financial statements will e refined:

Sta#eholders will e etter ale to identify the degree of responsiility that oth management and the

auditor assume for the financial statements:

There is still space for suse%uent convergence in the suggestions availale now and all the interested

parties should e struggling in order to achieve that target 4ltimately8 the victory of the new auditor report will hang on efficient implementation:

The way into accomplishing a common model worldwide for the report of audit is not uneatale and

smaller than it was efore:

All standard setters8 sta#eholders and regulators are encouraged to to their est to touch woldwide

alignment:


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THA!" YOU#

2naida Luca

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