Are UK audit reports about to change again? Katharine Bagshaw considers the possibilities.
The idea of praise being heaped on auditors for the quality of their 'innovative' and 'insightful' audit reports would have seemed unlikely a decade ago; that the source of that praise should be investors, even less likely. But this is precisely what happened when the Investment Management Association hosted its inaugural Auditor Reporting Awards in November 2014. In the FTSE 100 category KPMG's report on Rolls-Royce Holdings plc won the most insightful category and PwC won the most innovative award within the FTSE 250 group for its report on JD Wetherspoon plc.
Substantive changes to auditor reporting standards have been a long time coming. The UK's Financial Reporting Council (FRC) led the world in 2013 when it revised ISA (UK and Ireland) 700 The independent auditor's report on financial statements. Auditors of entities that are required, or choose voluntarily, to apply the UK Corporate Governance Code or explain why they have not, must now include in their audit report details of the risks that had the most effect on audit strategy, materiality levels, and an overview of the scope of the audit, showing how risk and materiality were dealt with. Now, more changes are on the way.
This is an extract from an article in the April 2015 edition of Audit & Beyond, the magazine of the Audit and Assurance Faculty.
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