22 June 2012

IFAC: IAASB indicates future direction of improved auditor reporting

The Invitation to Comment (ITC) features a revised auditor’s report that illustrates the application of the IAASB’s suggested improvements. The ITC also provides the IAASB’s rationale for the suggested improvements, together with a discussion of their potential value and impediments, and in what areas feedback is sought. 

“The global financial crisis has spurred users of audited financial statements to want to know more about individual audits and to gain further insights into the audited entity and its financial statements. While the auditor’s opinion is valued, many perceive that the auditor’s report could be more informative and shine light on key matters based on the auditor’s work. Change, therefore, is essential and the IAASB is strongly committed in the public interest to deliver meaningful improvements to auditor reporting as quickly as possible”, said Prof Arnold Schilder, IAASB chairman.

At the heart of the suggested improvements is the need for transparency on matters specific to the audited financial statements and the audit that was performed. A proposed new section in the auditor’s report, “Auditor Commentary”, is envisaged to be the mechanism by which auditors may call attention to matters that are, in the auditor’s judgment, likely to be most important to the users' understanding of the audited financial statements or the audit. There are also suggested improvements with respect to new statements regarding going concern and other information in documents containing the audited financial statements, the description of the responsibilities of the auditor and key features of the audit itself, and enhancement to the format of the report.

“The Consultative Advisory Group (CAG), which comprises over 30 member organisations and observers that are key stakeholders of the IAASB, is of the view that this is a very important project”, said Linda de Beer, IAASB CAG chairman. “All CAG member organisations, but in particular user groups and regulators, are of the view that the auditor’s report should point the reader to key aspects important for an understanding of the entity and its financial statements. Mandatory auditor commentary will go a long way to address this need of shareholders and others. The CAG responded very positively at its meeting in March 2012 to the aspects that the IAASB is addressing in the ITC.”

The ITC includes planned dates for IAASB roundtables in the North American (September 10), European (September 14), and Asia Pacific (October 8) regions. Comments on the ITC are requested by October 8, 2012.

Press release

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