Clear, transparent reporting
The new auditor’s report
The new auditor’s report will improve the transparency of our work. Disclosing key audit matters is an important milestone for audit committee members, users of the financial statements and auditors. We fully support this innovation that builds confidence in our audits and is, therefore, beneficial for our clients.
In Belgium and abroad, business has become more complex over the last few years, impacting areas of judgment, estimation and uncertainty. Financial reporting, reflecting the business of the entity, has had to evolve as well. However, the auditor’s report, being the key deliverable addressing the output of the audit process, has been a standard pass/fail report until now, with limited, if any, information that relates specifically to the entity.
Investors and users of financial statements have demanded that the auditor’s report provide more transparency and insight into the audit.
The auditor’s report is being revolutionized.
The International Auditing and Assurance Standards Board (IAASB) released in 2016 new and amended International Standards on Auditing (ISAs) which transform the auditor’s report.
At the same time, the European Parliament and the Council of the European Union (EU) also released the Regulation 537/2014 on specific requirements regarding statutory audit of Public Interest Entities (PIEs). As a result of the combination of those two standards, the auditor’s report on PIES will include key information relating to the audit of the entity.
The IAASB and EU Regulation intend for the new and revised auditor reporting standards to result in an auditor’s report that increases the transparency of and confidence in the audit and the financial statements, which is in the public interest.
Ultimately, the IAASB and the EU believe that the transformation of the auditor’s report is critical to the perceived value of the financial statement audit and to the continued relevance of the auditing profession.
We welcome these innovations because they are beneficial for audit committees, shareholders, regulators and auditors in mainly two ways:
- The elements in the previous report will be reordered so that the most important information comes first: the audit opinion.
- For PIEs, the auditor’s report will include a section about key audit matters after the opinion section. In this section the auditor will describe certain matters that were of most significance in the audit.
The IAASB’s amended standards and EU Regulation are effective in Belgium for periods starting on or after 17 June 2016.
Auditor’s reports for non-PIES will have the same structure with the audit opinion at the top but they will not include key audit matters.
Besides providing answers to questions such as: “What are the expected benefits? Which auditing standards are affected? What about the international developments?”, this publication also offers an overview of the new requirements and discusses the key audit matters and new reporting structure.