FRC proposes to change audit reporting
Auditors will be required to warn investors about risks of “material misstatements” in clients’ financial accounts under proposals made by the Financial Reporting Council (FRC).
Under proposals, auditors would also have to explain how they reached their decision.
The FRC said the proposal was in response to criticism that auditors’ reports are uninformative.
MPs have criticised the Big Four audit firms for giving banks a clean bill of health shortly before the financial crisis.
The proposed changes build on changes made by the FRC to board and auditor reporting last autumn, including requiring the auditor to communicate information to the audit committee about significant audit judgments, the FRC said.