Background: Audit report to disclose key judgements and other significant matters

The International Auditing and Assurance Standards Board (IAASB) recently released an exposure draft entitled Reporting on Audited Financial Statements: Proposed New and Revised International Standards on Auditing (ISAs), which proposes significant changes to audit reports.

The IAASB has issued these proposals in response to constituent feedback following the global financial crisis and European Commission (EC) proposals on audit reform, both calling for increased transparency about the audit that has been performed.

The most significant change is to require auditors to disclose key audit matters in the audit report, being “those matters that, in the auditor's professional judgment, were of most significance in the audit of the financial statements of the current period". The auditor will consider those areas of the financial statements that are significant risks, involve significant auditor judgement, areas where difficulty was encountered during the audit (such as difficulty obtaining sufficient appropriate audit evidence) and circumstances where the auditor had to significantly modify the audit approach, including as a result of the identification of a significant deficiency in internal control.

This Accounting alert from Deloitte (New Zealand) discusses the IAASB proposals.

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