ICAS is calling for changes in the way auditors handle external assurance in corporate reporting, including how they review the management commentary, in order to restore investor confidence in company annual reports.

In a new report, Balanced and Reasonable, the institute says that investors are increasingly paying more attention to the information disclosed in the management commentary, covering the company's business model and prospects.

It wants this to be evaluated separately by auditors, who would be required to show they had challenged management on the narrative in order to determine whether the story presented is 'balanced and reasonable' in their opinion.

ICAS suggests that the current two-tier assurance framework may need to be reconsidered to enable the provision of such positive assurance and suggests a new three-tier model offering 'high', 'medium' and 'low' assurance.

ICAS says that in order to express a positive opinion that the narrative is 'free from spin and provides users with an insight into the way in which the organisation is being directed', auditors will need greater professional judgement and be willing to 'move beyond their comfort zone'.

Anne Adrain, ICAS' assistant director of assurance, said: 'The expression of such positive assurance will require confidence and courage on the part of the auditors but, by doing so; this should enhance the value of the reporting process and rebuild trust and confidence in business and the audit profession.'>

ICAS is inviting comments on its report, which is available on its website.