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IAASB New Auditor’s Report

James Gunn
Managing Director, Professional Standards
Why Change the Auditor’s Report?

Improve relevancy of audit

Enhance communicative
Stimulate more robust
interactions and value to users
communication
between auditor and Improve audit
entity quality and
professional skepticism

Enhance preparer focus


onkey risk areas Clarify responsibilities,
and disclosures and improve
understanding of audit
The Global Journey
Enhanced reporting by auditor,
2013 management and TCWG (2013)
2014
Enhanced auditor reporting
for PIEs (2014)

2015 Some “early birds” with new style


audit reports under the ISAs
including KAMs
2016

Mandatory ‘dry runs”

ISAs come into effect for


2017 Dec 2016 year ends
Re-Proposed
auditor reporting EU – Enhanced auditor
standards (May 2016) reporting for all PIEs come
into effect (2017)
The New ISA Auditor’s Report – What’s Changed

Key Audit Matters • Required for listed entity


audits, voluntary for
others
Matters • Areas of higher risk,
communicated with significant auditor
TCWG judgement, matters of
significant affect on
audit
Matters that required
significant auditor attention • Communication: why
matter is a KAM, how
addressed, related F/S
Matters of most significance in disclosures
the audit • Documentation: Auditor
judgements & decisions
on KAM
KAM – Delivering Entity-Specific Information to Users

Boilerplate,
generic Consistency
language; and
not relevant to Comparability
the entity or audit

Entity- and
Relevance and audit specific
information of
Usefulness increased value
Other Key Features of the New Auditor’s Report

Audit Opinion – Required to be presented first


Auditor’s Report

Key Audit Matters – Required for listed entities

Going Concern – Additional focus

Other Information – Enhanced work effort and new section

Responsibilities – In the audit; Independence and ethical


obligations; Engagement partner (listed entities)
What We Are Hearing…

Some initial evidence of


enhanced audit quality, also
benefits to corporate
governance
a “Positive experience!”

“Now much more


“Valued new source engagement
of complementary between auditor
information” and management”

Start early, bring Innovative approaches


management and welcomed!
corporate governance
on the journey “Visually appealing
reports, information
“Write with the clearly signposted,
audience in mind” clear and logical
structure”
Enhanced Auditor Reporting and Audit Quality

Interactions

Process
Regul-
TCWG
ators

Audit
Quality

Inputs Outputs
Manage-
Users
ment

Diagram extracted from:


A Framework for Audit
Auditor Quality: Key Elements that
Create an Environment for
Audit Quality
February 2014
Implementation Resources

•Auditor Reporting Fact Sheet


•Auditor Reporting “At a Glance”
•Basis for Conclusions
•Guidance on KAM and Going Concern
•Illustrative KAM examples
•Targeted publications, e.g., “More
Informative Auditor’s Reports – What
Audit Committees and Finance
Executives Need to Know”
….And More
…A Beginning of a Journey
Continuing Improvement to Meet the Public Interest

ISAs fit for


purpose
Proactive Reinforcing
quality robust
manage- communic-
ment ation

Independent
and challenging Transparency &
skeptical mindset audit quality
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