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The International Auditing and Assurance Standards Board (IAASB) today released a key milestone consultation document in its work to enhance, on a global basis, the communicative value of the auditor’s report on financial statements. The IAASB’s Invitation to Comment: Improving the Auditor's Report sets out the indicative direction of the board’s future standard-setting proposals to improve how and what auditors report in accordance with International Standards on Auditing (ISAs). 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 organizations 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 organizations, 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.” Noted James Gunn, IAASB technical director, “The IAASB has heard – and indeed embraces – the call from stakeholders to re-examine and, to an extent re-invent, the auditor’s report. There is still much work to be done, and the IAASB will continue its deliberations in 2012 and 2013. However, it is critical that the IAASB hear from a wide range of stakeholders at this stage regarding the suggested improvements and whether they will achieve the value that users seek in order for the board’s future standard-setting proposals to develop in a way that will best serve the public interest.” The ITC includes planned dates for IAASB roundtables in the North American (September 10), European (September 14), and Asia Pacific (October 8) regions. The IAASB intends to finalize plans for these roundtables in the coming weeks, and will post them on its Auditor Reporting page. How to Comment About the IAASB The IAASB develops auditing and assurance standards and guidance for use by all professional accountants under a shared standard-setting process involving the Public Interest Oversight Board, which oversees the activities of the IAASB, and the IAASB Consultative Advisory Group, which provides public interest input into the development of the standards and guidance. The structures and processes that support the operations of the IAASB are facilitated by IFAC. About IFAC IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 167 members and associates in 127 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.
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