01 August 2013

FRC welcomes IAASB's proposals to transform auditor's reports

The FRC believes the IAASB's proposals on the form and content of auditor's reports provoke an important debate amongst global stakeholders and respond to calls from users of audited financial statements for more informative and insightful auditor's reports.

Responsive to the same calls for change, the FRC published amendments to audit committee reporting under the UK Corporate Governance Code and auditing standards in October 2012 and further changes to its auditing standards in June 2013. The FRC is also launching a formal consultation of its stakeholders about these proposals in order to assist the FRC in developing its response to the IAASB’s consultation. The IAASB's proposals, published on July 25th, include a requirement for auditors of listed entities to communicate in the auditor's report those matters that the auditor judges to have been of most significance in the audit of the financial statements.
 
Nick Land, a member of the Board of the FRC and Chairman of the FRC’s Audit and Assurance Council commented: "We welcome the IAASB’s proposals for enhancing auditor reporting standards. We believe they are, in principle, consistent with the governance-led changes made by the FRC over the last year to audit committee and auditor reporting in the UK and Ireland.

The FRC’s approach combines reporting to users by the Board and auditors, reinforcing the responsibilities of the board and the auditor for reporting information that is primarily in their respective domains, whilst holding both to account for effective overall communication. I would encourage all our stakeholders to engage in the debate about these proposals and how they should be integrated with the changes the FRC has already made and to assist us in developing our response to the IAASB’s consultation."
 
Melanie McLaren FRC Executive Director, Codes and Standards added: "The FRC is an active supporter of the work of the IAASB in seeking to establish globally applicable auditing standards. The UK was one of the first countries to adopt the ISAs as the basis for its national standards.  The IAASB’s standards are developed in the knowledge that there are differences in governance practices internationally.  

The IAASB’s proposals necessarily seek to address users’ concerns primarily through enhanced reporting by auditors. Importantly, they also recognise the need for modifications where national laws and regulations take a more holistic approach to governance, as in the case of the FRC’s recent changes."

Press release

FRC Invitation to Comment on IAASB Exposure Draft (July 2013)

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