IAASB New Auditor’s Report

James GunnManaging Director, Professional Standards

Why Change the Auditor’s Report?

Stimulate more robust interactions and communication between auditor and entity

Enhance preparer focus on key risk areas and disclosures

Enhance communicative value to users

Clarify responsibilities, and improve understanding of audit

Improve audit quality and professional skepticism

Improve relevancy of audit

The Global Journey

20132014

2015

2016

2017

Enhanced reporting by auditor, management and TCWG (2013)Enhanced auditor reportingfor PIEs (2014)

Some “early birds” with new style audit reports under the ISAs including KAMs

ISAs come into effect for Dec 2016 year ends

Mandatory ‘dry runs”

Re-Proposed auditor reporting standards

EU – Enhanced auditor reporting for all PIEs come into effect (2017)

(May 2016)

The New ISA Auditor’s Report – What’s Changed

Key Audit Matters

Matters communicated with TCWG

Matters that required significant auditor attention

Matters of most significance in the audit

• Required for listed entity audits, voluntary for others

• Areas of higher risk, significant auditor judgement, matters of significant affect on audit

• Communication: why matter is a KAM, how addressed, related F/S disclosures

• Documentation: Auditor judgements & decisions on KAM

KAM – Delivering Entity-Specific Information to Users

Consistency and Comparability

Relevance and Usefulness

Boilerplate, generic language;not relevant to the entity or audit

Entity- and audit specific information of increased value

Other Key Features of the New Auditor’s Report

Auditor’s ReportAudit Opinion – Required to be presented first

Key Audit Matters – Required for listed entities

Going Concern – Additional focus

Other Information – Enhanced work effort and new section

Responsibilities – In the audit; Independence and ethical obligations; Engagement partner (listed entities)

What We Are Hearing…

“Now much more engagement

between auditor and management”

Some initial evidence of enhanced audit quality, also

benefits to corporate governance

“Valued new source of complementary

information”

“Positive experience!”

“Visually appealing reports, information clearly signposted,

clear and logical structure”

Start early, bring management and

corporate governance on the journey

“Write with the audience in mind”

a

Innovative approaches welcomed!

Enhanced Auditor Reporting and Audit Quality

Process

OutputsInputs

AuditQuality

TCWG

Auditor

Manage-ment Users

Regul-ators

Interactions

Diagram extracted from:A Framework for Audit Quality: Key Elements that Create an Environment for Audit QualityFebruary 2014

Implementation Resources

• Auditor Reporting Fact Sheet • Auditor Reporting “At a Glance”• Basis for Conclusions• Guidance on KAM and Going Concern • Illustrative KAM examples • Targeted publications, e.g., “More

Informative Auditor’s Reports – What Audit Committees and Finance Executives Need to Know”

….And More

…A Beginning of a Journey

ISAs fit for purpose

Transparency & audit quality

Independent and challenging skeptical mindset

Continuing Improvement to Meet the Public Interest

Proactive quality manage-ment

Reinforcing robust

communic-ation

www.iaasb.org