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Discuss about issues of expanded audit report (why there is a need for a change and how it

can be done)

According to International Auditing and Assurance Standard Board, the auditor's report is
the auditor's essential method for communication with an entitys stakeholders. Henceforth, the
report must be important and convey value for the stakeholders. While the present binary
auditor's report is valued, numerous stakeholders see that it could be more instructive. Clients or
users of inspected financial statements have been calling for more appropriate information for
their decision-making in today's worldwide business environment with progressively complex
financial reporting requirements. The worldwide financial crisis has additionally activated
renewed focus of users, specifically institutional investors and financial analysts, to need to
know more about individual audits and to increase further bits of knowledge into the audited
entity and its financial statements.
Besides, for many years; auditors have given a binary "pass/fail" opinion on an
organization's financial statements. Either the financial statements genuinely display the
organization's financial position also, operations according to the standards, or they don't. Even
though the traditional approach stays important, numerous trusts that it is not sufficient. Users
asking for more information to be included in the audit reports. Change, in this manner, is
essential. Thus, the main issue of expanded audit report arises because of lack of or insufficiency
of information in the audit reports.
Therefore, IAASB issued the new and revised auditor reporting standards such as ISA
701 (new), ISA 700, ISA 570, ISA 705, ISA 706, ISA 720 and ISA 260 (revised). Accounting
standard setters have a basic part to play in guaranteeing that the financial statements that result
from the use of a financial reporting framework meet the financial data needs of users.
Administration and TCWG have an obligation to set up the financial statements in a way that
accomplishes reasonable presentation at the same time, maybe significantly all the more
essentially, they ought to look for to display the entitys information in a way that gives users of
the financial statements a clear and complete picture of the entity and its operations, including its
financial results. The aggregate efforts of the IAASB, and these and other groups, for example,
government and securities controllers, are all with the same objective as a main priority: to
enhance users' capacity to settle on more educated choices on the premise of the financial
statements and the review.
The proposed changes are intended to essentially give advantages to investors, analysts
and other users of financial reports. The key deliverable of the audit, from the point of view of
the users of the financial report, is the audit report. The IAASB trusts that enhancing the
configuration of the auditors report may decidedly effect users' impression of audit quality.
Enhanced view of audit quality may likewise emphatically affect the user's trust and confidence
in the financial report. For example, UK already establishes the standard and the auditors are in
the second year of new enhanced audit report. UK PwCs Diana Hillier mentions that, their
shareholders trust that the new reports have empowered them to enhance their engagement with
the Board and Audit Committees. Shareholders like the description of risks and reactions that
are more granular and entity-specific. Despite the fact that that makes the reports longer, they
discover them more instructive. Materiality disclosures in the audit reports have enhanced, with

more knowledge into the method of reasoning for materiality judgment. It helps when the
reports highlight year-on-year changes.
Furthermore, expanded audit report enhanced communication between auditors and
investors, and in addition those charged with corporate governance. It also increased users trust
in audit reports and financial statements which also increased transparency, audit quality, and
improved data value. For example, EY stated that, EY supports initiatives to enhance the
auditors report. We believe expanded auditor reporting will not only help respond to investor
demands, but will also help increase public confidence in financial reporting and governance.
Despite the practical challenges, we believe that auditors should be more transparent with the
public about the audit. This will contribute to the ongoing relevance of the financial statement
audit and help serve the public interest.
In addition, expanded audit report improve the communicative value and relevance of the

auditor's report through proposed amendments to International Standards on Auditing (ISAs)


requirements that address its structure and content; and it also figure out if and how the
IAASB's reporting ISAs, in their outline, can be adjusted to oblige advancing national financial
reporting administrations, while in the meantime guaranteeing that basic and crucial substance
is being communicated .
The proposed expanded audit report must be standardized to all type of organizations (public
listed companies and private companies). The regulatory body must ensure that all the professional
auditors comply with the requirements of the standard during preparation of audit reports. Auditors must
collect all the evidence and include it in audit report in accordance with the users expectation. For
example, The Public Company Accounting Oversight Board in the US is right now considering
proposition and will sooner or later require extended reporting that will influence a number of Canada's
biggest organizations, paying little mind to Canadian or international standard. The International
Auditing and Assurance Standards Board effectively endorsed new prerequisites that include: discussion
of areas of higher risk of material misstatement; impact on the audit of significant events or transactions;
and discourse of significant auditor judgments, such as, those related with material estimates.

Reference

Chartered Accountant Australia, New Zealand (2013), Auditors' reports - the changes are
coming; retrieved from http://www.charteredaccountants.com.au/NewsMedia/Charter/Charter-articles/Audit-and-assurance/2013-11-Auditors-reportsthe-changes-are-coming

EY (2014), Enhancing the auditors report; Retrieved from


http://www.ey.com/Publication/vwLUAssets/EY-overview-enhancing-the-auditorsreport/$FILE/EY-overview-enhancing-the-auditors-report.pdf
IFAC (2015), AASB Issues Final Standards to Improve Auditor's Report; Retrieved from
https://www.ifac.org/news-events/2015-01/iaasb-issues-final-standards-improveauditors-report
KPMG (2014), Proposed changes to Auditor Reporting & Audit Trends; Retrieved from
http://www.kpmg.com/Ca/en/services/Audit/AuditCommittee/Documents/aciroundtable-highlights-report-fall-2014-en.pdf
Retrieved from http://www.pwc.co.uk/finance/assurance/expanded-audit-reports-are-a-hit.html
Retrieved from http://www.iaasb.org/projects/auditor-reporting