The new ISA for auditor reports required the addition of new sections including other matters and going concern issues what criteria can auditors apply to ensure still a short auditor reports ?
Dear Mohamed Hegazy
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Your question seems to be contrary to the objectives of the new extended audit report. The purpose of the new standard is increase the content of the report by adding information that better enables users to know of significant issues auditors encountered in the engagement, and how they addressed them. They are not meant to be "short".
Dear Greg when you look into the details contained in management letters you would understand the purpose from my questions as I have clients in my CPA firms for whom I include quite a nice number of misstatements some materials and other not. Will for example materiality be considered the criterion for such inclusion. If so will this be similar to what we have now in terms of including materials misstatements but with the new classification within the new audit report standards. Another point sometimes we repeat remarks from previous years if they are so materials but important for management considerations will this be considered for inclusion within the new standard as key matters.
As Greg Shailer has pointed out above, the new standards are not meant to be "short", the IAASB and other regulating boards are aiming towards a more informative report in order to improve the communicative value to stakeholders.
If you are to compare the length of UK reports from 2011-2012 and from 2013-2014 you will see that the differences are massive. In the UK, the FRC has adopted new auditing rules in 2013, which are compliant with the new IAASB regulations on reporting on Key Audit Matters. And the investor response from the UK (according to Big-4 Auditors) has been extremely positive. Reporting on KAMs is an innovative way if providing more information regarding the audit mission, so keeping the report at a minimum/maximum was never the purpose of the new auditing standards.
I believe that such discussion is of great interest from both an academic and practical perspectives. Let us first agree about the purpose from establishing the new report standards. As I understand it is to provide stakeholders with more usable information concerning the fair presentation of the companies financial statements to help them make more informative investments and financial decisions. I studied some of the UK audit reports prepared after 2013 and I found a lot of details concerning specific accounts balances, compliance with law and regulations, corporate governance and assessment of the going concern assumptions. Some of the published reports included graphs and tables aimed of making the content appealing to investors and other users. The question is will individual investors and financial institutions employees with normal financial knowledge be able to understand some of these reports. I can tell right a way that this will not be possible and I am sure that many of the banks and financial institutions either have started to hire employees with good auditing and accounting background to be able to understand the content of some of these reports given the extent of explanations provided in such reports. From a practical point of view I wished that such changes would have been taken gradually with CPA firms attempting to provide short paragraphs for these accounts balances and other issues then later more explanation and interpretations are provided in such reports.
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