Invitation to comment (ITC) on improvements to auditor reporting
The ITC is open for comment to 8 October and sets out the IAASB suggested improvements to audit reports. It provides the following:
• An improved auditor’s report
• A summary of the Board’s rationale
• Explanation of how the IAASB’s suggested improvements to auditor reporting could be tailored to accommodate national financial reporting regimes
The illustrative 3 page auditor’s report to shareholders is set out with the following paragraphs:
• Basis of opinion
• Going concern
• Auditor’s commentary
• Other information
• Respective responsibilities of management and auditors
• Report on other legal and regulatory requirements
The going concern illustrative paragraph is used to highlight the use of going concern assumptions and to bring to the user’s attention the auditor’s conclusion on the appropriateness of management’s use of the going concern assumption. There is an explicit statement as to whether material uncertainties in relation to going concern have been identified. Appendix 2 provides examples of how the illustrative auditor’s report would be tailored in relation to going concern or other information in certain circumstances.
The auditor’s commentary illustrative paragraph highlights the matters that in the auditor’s judgement are most important to users’ understanding of the financial statements. One of the examples given is the audit strategy relating to the recording of revenue, accounts receivables and cash receipts. The example highlights a new system that is in use, its impact and importance, the effect on the audit strategy and how those charged with governance have considered the change.