As the number of audit tenders rises, investors are closely examining auditor disclosures about materiality and audit scope, says Katharine Bagshaw FCA
In the face of considerable opposition from some quarters, the Financial Reporting Council (FRC) mandated that as of June 2013, auditors should include information in the audit report about the scope of the audit and the materiality levels applied.
This was a gutsy move and a significant one. Nothing like it had ever been required before and firms were understandably nervous. Materiality is a big number in a listed company audit and the potential for misunderstanding is real.
The move sent out important messages about the FRC’s priorities, particularly the weight it attaches to information about the audit that investors have been calling for.
Perhaps more subtly, it also flags the FRC’s concerns about the interaction of audit materiality, audit scope and audit fees, when fees are under pressure.
