After a six-year period of development, the International Auditing and Assurance Standards Board (IAASB) has released its new and revised auditor reporting standards which are designed to increase transparency and which it describes as a ‘step change’ in audit communications
The biggest change is the new requirement for auditors of listed public entities’ financial statements to communicate ‘Key Audit Matters’, which are defined as those matters that the auditor views as most significant, with an explanation of how they were addressed in the audit.
The IAASB has also strengthened the rules on going concern matters, including new requirements for disclosures in the financial statements, to add more transparency in the auditor’s report about the auditor’s work.
As well as the new ISA 701, Communicating Key Audit Matters in the Independent Auditor’s Report, there are a number of revised ISAs, including ISA 700 (Revised), Forming an Opinion and Reporting on Financial Statements, and ISA 570 (Revised), Going Concern.
The new and revised standards will be effective for audits of financial statements for periods ending on or after 15 December 2016.
Professor Arnold Schilder, IAASB chairman said: ‘These changes will reinvigorate the audit, as auditors substantively change their behaviour and how they communicate about their work.’
IAASB is introducing additional resources on its website including an auditor reporting toolkit and plans to undertake a post-implementation review to assess whether the standards are achieving their intended effects and whether further changes are required.
Details of the new standards are here
