Enhanced reporting by auditors

Original recommendation

The Brydon Review recommended that auditors should be free to include original information, materially useful to a wide range of users, in their audit report and at the AGM, and not be confined to commenting on that which has already been stated by directors. (Source: Brydon 5.3.2)

The Brydon Review recommended that this obligation should be extended to material outside the Annual Report that is used in investor presentations and RNS announcements. (Source: Brydon 5.3.12)


The Government (Section 6.5) intends to legislate to require auditors of Public Interest Entities, as part of their statutory audit, to report on the work they performed to conclude whether the proposed directors’ statement regarding actions taken to prevent and detect material fraud is factually accurate. Such reporting will enable users to understand the nature and extent of the work performed and the evidence obtained by the auditors relating to the actions which the directors state they have taken.

The Government is minded to give auditors a specific responsibility to consider relevant director conduct and wider financial or other information in reaching their judgements, in particular whether financial statements give a “true and fair view”. This would be a statutory requirement of auditors. The requirement would not require the additional information to be audited, but the auditor would be expected to shape their work on the financial statements according to this broader understanding of the company’s position and strategy.

In relation to graduated findings, the FRC has agreed to consider the recommendations of the Brydon Review and the FRC Review relating to auditor reporting holistically, and will consult, as appropriate, on any proposed changes to its standards. In doing so, it will seek to balance promoting innovation and competition amongst auditors with the potential benefits, in terms of comparability between companies, of a common framework for enhanced reporting.

In relation to amending the “true and fair” opinion, the Government supports developing a new user guide to audit and the FRC has agreed to take this forward. The Government considers this is likely to prove more effective in improving user understanding than replacing “true and fair” in audit reports with “present fairly, in all material respects”. Changing the wording of the legislative test also carries the risk of unintended consequences. A new user guide could explain how the true and fair requirement is applied by auditors in practice, making clear that this involves an assessment of whether key accounting estimates and judgements underlying the numbers reported in the financial statements are both reasonable and adequately disclosed.

Government response

The regulator is asked to seek to deliver change in this area through ongoing improvements to auditing standards and guidance, to help ensure auditors are fully and consistently considering wider information in reaching their audit judgements. This includes the regulator effectively enforcing UK standards whilst also influencing the development of international standards in this regard.

Correction list for hyphenation

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