The Auditing Practices Board (APB) has today published an Exposure Draft of proposed revisions to ISA (UK and Ireland) 700 ‘The Auditor’s Report on Financial Statements’ in order to facilitate a more concise auditor’s report.
In 2007 the APB issued a Discussion Paper entitled ‘The Auditor’s Report: A time for change?’ which sought views on what steps were needed to be taken to reflect the changes introduced by the Companies Act 2006 (CA 2006), and whether other, more wide ranging, changes should be made to the form and content of the auditor’s report.
In response to the views of institutional investors, preparer organisations, public-sector bodies and some auditing firms and individuals the Exposure Draft facilitates a much more concise auditor’s report. It is possible to make the report more concise by moving much of the standard language, relating to the auditor’s responsibilities and the basis of the auditor’s opinion, from the auditor’s report and including it instead within a “Statement of the scope of an audit and the auditor’s reporting responsibilities” which would be posted to the APB’s web site and cross referred to from the auditor’s report.
A number of the accountancy bodies and auditing firms strongly expressed the view that global convergence, through compliance with ISAs, should be the APB’s principal objective. In response to their concerns the proposed revision has been made so that it will not preclude auditors from asserting, in their audit reports, that the ISAs have been complied with. The proposed revision moves towards global convergence by requiring the auditor’s opinion on the financial statements to be separate from other opinions required by law and regulation. The two-part opinion is a feature of ISA 700 as issued by the International Auditing and Assurance Standards Board (IAASB).
Richard Fleck, Chairman of APB commented:
“The European Commission has yet to decide on the form of auditor’s report to be used within the EU and the IAASB has agreed to consider developments with regard to the auditor’s report and determine what consequential action it should take in relation to ISA 700. Consequently there is a window of opportunity in which the APB believes it can most effectively influence international decisions on the auditor’s report by moving to implement a concise auditor’s report and commencing research to better understand what can realistically be done to make auditor’s reports more informative.”
Comments on the Exposure Draft are invited by 28 November 2008. APB would prefer to receive letters of comment in electronic form, preferably in word format. These may be sent by e-mail to s.leonard@frc-apb.org.uk
Bulletin 2008/8 relating to short accounting periods
Subject to comments received, it is proposed that ISA (UK and Ireland) 700 (Revised) will take effect for accounting periods ending on or after 5 April 2009. Bulletin 2008/8 provides illustrative auditor’s reports for use in the UK relating to those (short) accounting periods that commence on or after 6 April 2008 but end before 5 April 2009 and which are required to comply with CA 2006.
Obtaining the documents
The Exposure Draft can be downloaded from the Exposure Drafts section of the APB’s website. The Bulletin can be downloaded from the Bulletins section of the same website. Hard copies of the Exposure Draft may be obtained free of charge and post free from FRC Publications, 145 London Road, Kingston upon Thames, Surrey KT2 6SR. Telephone 020 8247 1264. Website: www.frcpublications.com. Hard copies of the Bulletin may be obtained at a cost of £5.00 from the same address and telephone number.
