IAASB Demands Changes in Audit Reporting

In view of IAASB’s demand for bringing about fundamental changes to reporting done by the auditors, the persistent outcry for auditors to give their opinion on information specific to company has reached its peak and the auditors can no longer afford to ignore it now.

In the month of June, IAASB had issued few proposals in order to improve the report that auditors publish along with yearly financial statements, which further added weight to same kinds of initiatives introduced by FRC and PCAOB and was also part of the European Commission’s plan to examine the auditing market.

Apart from enhancing corporate reporting, the different initiatives are also aiming to put pressure on auditors so that they remain transparent about some important matters in the statements and the manner in which individual auditing is conducted.

The newly introduced changes are going to make the report from the auditor more informative and interesting. The report has been criticized on several occasions for containing very little information regarding the manner in which the auditor was carrying out its duties and for incorporating standard wordings that do not throw light on the financial statement’s subjective issues.

David Herbinet, audit partner, Mazars stated that by adding additional information, the overall visibility and perception of auditing quality will improve. He also mentioned that it will help in repairing the spoilt image of audit that was affected when the banking sector had collapsed in the year 2008.

Even though financial analysts and investors had initially called for changes, the companies were showing little interest to their demands. However, now when change is inevitable, auditors have taken note of the situation and are looking to do something about it.

IAASB’s deputy chairman, Dan Montgomery noted that the auditors have been responding positively and they have also accepted that a change is required.

Some of the main improvements suggested by them revolve around transparency requirements on issues associated with audited statements and auditing performed. As per the IAASB’S proposal a new section needs to be added based on which the auditor can focus more on issues that are important for the understanding of the user. These issues include learning more about audit or the financial statements that have been audited.