The 44-page IAASB paper, Supporting credibility and trust in emerging forms of external reporting: ten key challenges for assurance engagements, focuses on reporting of materiality, building assertions in planning and performing the assurance engagement, governance and internal control processes, the volume of narrative and forward looking information and the extent of professional scepticism and professional judgment shown by auditors.

It also considers the competence of practitioners performing the engagement, as well as the format of assurance reports.

The discussion paper explores:

• the factors that can enhance credibility and trust, internally and externally, in relation to emerging forms of external reports;
• the types of professional services covered by the IAASB’s international standards most relevant to these reports, in particular assurance engagements;
• the key challenges in relation to assurance engagements; and
• the type of guidance that might be helpful to support the quality of these assurance engagements.

In the UK, for example, the Financial Reporting Council’s Corporate Governance Code was amended in 2016 to require a viability statement and public disclosure of how the directors of an entity have assessed its prospects and over what period. This information is included in the strategic report as part of a fair, balanced and understandable annual report and improves transparency about the entity’s ability to sustain itself in the future (ie, whether it is viable in the longer term). 

The IAASB also highlights the changing nature of information with increasing use of social media and the availability of instant news, which is shaping the views of key stakeholders and challenging the accepted reporting cycle.

‘With access to more, and timelier, sources of information, stakeholders’ expectations of the depth and quality of the story that entities tell are increasing and stakeholders are better able to assess and challenge such information,' the report states.

‘The IAASB needs to be at the forefront of the debates on external reporting and how professional accountants and other practitioners can contribute to enhancing credibility and trust,’ said IAASB chairman professor Arnold Schilder.

‘We hope this paper furthers the debate and helps us gain a deeper understanding of how the IAASB, as the global assurance standard setter, can contribute to the quality of different engagements, in the public interest, and where others can or need to play a role.’

The discussion paper also sets out the principal findings from research and outreach regarding developments in emerging forms of external reporting frameworks and professional services most relevant to these reports, irrespective of whether such reports are part of the annual report or published as separate reports.

‘External reporting is evolving and we know various professional services are being performed, including assurance engagements in accordance with the IAASB’s international standards,’ said Merran Kelsall, IAASB member and integrated reporting working group chair. ‘We have identified ten key challenges in relation to assurance engagements that we would like to explore further, recognizing the need for flexibility in these services as the external reporting environment continues to evolve and mature.’

The IAASB working group is seeking input from investors, preparers, those in governance roles, standard setters, practitioners, internal auditors, regulators, academics, and other stakeholders in the external reporting supply chain.

Feedback will be used to shape IAASB’s response to the development of integrated reporting and discusssions about whether new or revised international auditing standards or guidance may be necessary.

Deadline and links

The deadline for comment is 15 December 2016.

The exposure draft, Supporting credibility and trust in emerging forms of external reporting: ten key challenges for assurance engagements, is available on the IAASB’s project page