FRC changes audit report standard

Auditors of listed companies will have to give a clearer explanation of the risks faced by their client under a revised standard that hopes to make audit reports more useful for investors.

The Financial Reporting Council (FRC) said that it has made a "significant" change to ISA 700 (UK and Ireland) 'The Independent Auditor’s Report on Financial Statements'. The revised standard will require auditors reporting on companies which apply the UK Corporate Governance Code to explain more about their work.

Since the financial crisis, shareholders have criticised audit reports for being hard to understand and for giving banks clean bills of health shortly before they collapsed.

There are also concerns about the quality of big-company audits. In May, the FRC, said it is reviewing director appointments in some FTSE 350 companies amid concerns that independence between auditors and companies is being undermined.

The revised audit standard requires auditors to...

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Comments
jon_griffey's picture

Even more narratvie

jon_griffey | | Permalink

Steve is absolutely right.  Haven't we heard complaints that current audit reports are already too long?  It looks like we are just going to end up with reports consisting of reams of turgid boilerplate waffle and the key points are just going to get buried.  Does including extensive narrative on auditing concepts like materiality really add anything to the shareholder experience?

What happened to concise?

StephenGuy | | Permalink

Steve and Jon are absolutely right.  If an audit report is unqualified it should be short and succinct and say what it means.  Adding loads of meaningless (to non accountants) drivel makes it exactly that - meaningless.

What about the Annual Report?

arnold28 | | Permalink

Proposals were made to amend the Annual Report so that it included an explanation of "how the audit committee assesses the external auditor".

Has this also been brought in?