New auditor's report

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Clear, transparent reporting

The new auditor’s report

Business in Switzerland and around the globe has become more complex over the last few years; and financial reporting has had to evolve by increasing the judgement, estimates, and uncertainty underlying financial statements. The auditor’s report, the key deliverable of the audit process, has up until recently been a standard pass/fail report. But now investors and other users of financial statements are demanding additional information that relates specifically to the entity. This provides more transparency and insight into the audit.

The International Auditing and Assurance Standards Board (IAASB) released new and amended International Standards on Auditing (ISAs), which will transform the auditor’s report. The new report will include important information relating to the audit of listed entities, such as key audit matters. This increases the transparency of and confidence in the audit and the financial statements, which is in the stakeholders’ interest. These amended standards are effective for audits of financial statements of listed companies and companies with outstanding listed bonds for periods ending on or after 15 December 2016. Its transformation into the Swiss Auditing Standards is expected at a later stage.

Our publication outlines the benefits for companies and investors and also provides a comparison of above mentioned enhancements with key global focus areas for audit regulators and standards authorities. It also provides a detailed overview of the new reporting structure and requirements. This includes an explanation of the auditor’s requirement to communicate those matters that were of most significance in the audit of the financial statements, also known as key audit matters.

Expected benefits include:

  • Increased transparency and trust
  • Relevance and credibility
  • Comparability
  • Better communication
  • Higher quality

The communication of key audit matters represents the main change to the auditor’s reporting. However, their identification may be difficult and describing key audit matters in a succinct and understandable manner, while keeping them relevant, may prove to be challenging. In some jurisdictions, the auditor’s report includes additional information for investors and financial statements going beyond the requirements of the IAASB’s amended standards.

In the UK, for example, the auditor may conclude on each key audit matter and provides further information about observations, if any. The auditor also presents the materiality levels and reporting thresholds applied on group and on component level plus how they have been determined. The auditor’s report further discloses the scope of the audit and the number of components for which full scope audits have been performed. This information increases the level of transparency and comparability even further. With the company’s agreement it is also permitted in Switzerland to disclose certain additional information in the auditor’s report. Early engagement between the auditor and the audit committee is going to be critical in this transformation of the auditor’s report.

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