As a board member or audit committee member of a listed company, the upcoming 30 June year end reporting season will bring with it a new form of enhanced auditor reporting. In this new form of report, the auditor will be reporting on key audit matters they have come across in the audit of the financial report.
Key audit matters are defined in the auditing standard ASA 701 Communicating Key Audit Matters in the Independent Auditor’s Report introduced into legislation by the Auditing and Assurance Standards Board (AUASB) to be “those matters that, in the auditor’s professional judgement, were of most significance in the audit of the financial report in the current period. Key audit matters are selected from matters communicated with those charged with governance.”
Directors should already be having conversations with their auditors around these matters, according to Roger Simnett, Chair of the AUASB.
“It’s important that directors and audit committee members of listed companies pay attention and have good discussions with the auditors over these key audit matters to ensure that we have consistency in the reporting for 30 June as to what’s in the auditor’s report,” Simnett said.
A key concern for the board member and audit committee is whether the auditor provides original information about the company in the audit report, which is information not disclosed elsewhere by the company. This concern can be addressed by engaging in open and early communication with the auditor and considering whether additional disclosures are required within the financial report on these matters. These conversations should be taking place with your auditor now, to avoid any surprises post 30 June whilst you and your organisation are in the midst of the reporting season.
These changes were applicable to annual financial reports for periods ending on or after 15 December 2016. Therefore December year ends have already applied these changes and June year ends will be applying them in the coming months.
The aim of the enhanced audit report is to increase the public’s confidence in both the audit process and the company financial statements, by providing investors with:
- Greater transparency about auditors responsibilities; and
- Insights into key audit matters and how the auditors deals with those areas.
“We are aiming at trying to get enhanced disclosures in the financial statements to aid the decision-making process of the people using [them]” Simnett said.