New and Revised Auditor Reporting Standards – A Response to Investors’ Call for Change
In January 2015, the International Audit and Assurance Standards Board® (IAASB®) released its new and revised Auditor Reporting standards. As noted by IAASB Chairman Prof. Arnold Schilder, the new and revised standards will reinvigorate the audit, as auditors substantively change their behavior and how they communicate about their work.
The most significant enhancement is the new requirement for auditors of financial statements of listed entities to communicate “Key Audit Matters” – those matters that the auditor judges to be of most significance in the current period audit, with an explanation of how they were addressed in the audit. The IAASB has also focused efforts on enhancing auditor attention and communication on matters related to going concern in the auditor’s report.
In conjunction with the release of the standards, the IAASB established an Auditor Reporting Implementation Working Group (WG) to promote the awareness and effective implementation of the standards. The WG’s work to date includes the development of an Auditor Reporting Toolkit, featured on “The New Auditor’s Report” webpage, currently comprised of a Fact Sheet, an At a Glance (including an illustrative auditor’s report) and a slide presentation. Topic-specific publications on Key Audit Matters and Going Concern have also been developed, the most recent of which includes illustrated examples of Key Audit Matters.
IAASB Commences New Work Plan in Support of Its Strategy for 2015–2019
Highlights of the IAASB’s Most Recent Meeting
Outreach and Collaboration
The IAASB has continued its extensive outreach program contemplated in its Strategy. It has compliled a detailed listing of its outreach activities. Recent activity of note includes:
- Meetings with the Monitoring Group as a whole as well as its member organizations, for example:
- Continued dialogue with the PIOB, including participating in a joint meeting with the PIOB, the Chairs of the IAASB, IESBA and International Accounting Education Standards Boards and their Consultative Advisory Groups (CAGs).
- Semi-annual meeting with the IAASB CAG to obtain their input on the topics on the IAASB’s agenda from both a strategic and technical perspective.
- Country-specific outreach to the UK, including meetings with investors, regulators, accounting firms, professional accountancy organizations and other thought leaders.
- Together with the Fédération des Experts Comptables Européens (FEE), outreach to audit committee members in Europe to discuss the effects of the enhancements arising from the Auditor Reporting project on audit committees and matters related to audit quality more generally.
- Liaison with the International Accounting Standards Board to consider challenges arising from new financial reporting standards and the potential implications of these changes on the auditing standards.
- Continued engagement with accounting firms, through meetings with the Global Public Policy Committee (GPPC), Forum of Firms, and Small and Medium Practices Committee, on both strategic and technical matters.
Adoption and Implementation of the ISAs
Investor Advocate Assumes Role of the IAASB CAG Chair
Matthew Waldron, an investor advocate and current Director of the Financial Reporting Policy Group at the CFA Institute, assumed the role of chair of the IAASB CAG on April 1, 2015. He succeeds Prof. Linda de Beer, who had served as IAASB CAG Chair since September 2010. Mr. Waldron had been the CFA Institute’s representative to the IAASB CAG since 2008 and his prior experience includes working for KPMG, PwC, and the Federal Home Loan Mortgage Corporation.
Next Meetings
The next IAASB meeting will be held in New York, USA, on June 15-19, 2015. The agenda and meeting materials are posted approximately three to four weeks in advance on the IAASB Meetings page. Members of the public may register to observe the meetings and registration closes one week before the first day of the meeting.
The next IAASB CAG meeting is scheduled for September 15-16, 2015 in New York, USA.