Investors Expect Auditors to Read the Whole of the Annual Report
As per the Association of Chartered Certified Accountants (ACCA), the move towards the revision of the International Standard on Auditing (ISA) – 720, The Auditor’s Responsibilities Relating to Other Information, is a move in the right direction and is in response to the need of investors from auditors to provide with more detailed and informative reporting.
The proposed changes brought forward in the revised ISA – 720 were welcomed by the ACCA in its response to the amendments. ACCA held a debate on the proposals and took views of its members, who are settled in financial market around the globe. These reviews and the debate were included in ACCA’s response.
ACCA’s head of auditing practice David York said that now day’s annual reports of listed companies contain a lot more information than is usually given in financial statements. The size of information has almost doubled in the annual reports in the last two decades and stakeholders, specially the financial investors, require auditors to give report on the entire information given in the annual reports. This is to get value addition from audit of financial statements.
David York further adds that this should not be taken as extending the scope of audit and spreading it over the entire information, including company’s strategic reports as it would be highly excessive. Instead as per the proposal, this should be under the explicit reporting of auditor based on auditor’s reading and taking into account this ‘other information’. Which normally, auditors do it as part of professional ethics.
The International Auditing and Assurance Standards Board (IAASB) find it very difficult to make a standard that supports this view point, however at the same time they do not misguide financial investors on the existing level of assurance over ‘other information’.
The first draft was released in 2012 and had a lot of problems that were identified then by ACCA. However this new draft has eliminated many of them but still lacks at some technical issues. ACCA has not only responded over these issues but has also suggested practical solutions.