The new and revised audit reporting standards
TLong form audit report HE reputation of a capital market is directly linked to its financial disclosure make up. Adequate reassurance by auditors on whether financial statements are fairly presented should thus enhance investor confidence. Previous audit reports were too summarised only covering the:
◆ Responsibilities of the auditor and management,
◆ Scope of the audit and the
◆ Auditor’s opinion.
To determine users’ perception on the audit report, a research study was carried out by the International Auditing and Assurance Standards Board.
Research findings highlighted the need to improve on the communicative value and relevance of the report.
Below are some of the new and revised Audit Reporting Standards now applicable:
1) Communication of key audit matters in the independent Auditor’s report. This new standard assists investors to better understand the magnitude of underlying business risks from an auditor’s point of view. It becomes the basis for further engagement with management;
2) Modification to auditors opinion for enhanced guidance in forming an audit opinion;
3) Enhanced going concern report for improved assessment of the business’ ability to remain in operation subject to future outcome of events;
4) Emphasis of matter paragraphs and other matter paragraphs in order to draw investors’ attention to important matters necessary for their complete understanding of the financial statements; and
5) Communication with those responsible for governance to provide better understanding on key matters relating to the business. It also provides relevant two-way feedback during the audit process.
The new report is referred to as the Long Form Audit Report. The report brings in more detailed fundamental changes in both form and content. It enhances information disclosure for informed investor decision making. The Long Form Audit report will not only respond to investor demands but also enhance investor confidence in financial reporting and auditing standards.
The report became effective for audit periods ending on or after December 15, 2016.