Introduction of key audit matters leads to improved governance, audit quality and corporate reporting, finds ACCA

Recent changes to auditor reporting standards have not only improved the quality of information available to investors, but also had positive effects on broader elements of financial reporting, including governance and corporate reporting; according to a new report from ACCA (the Association of Chartered Certified Accountants).

Key audit matters: unlocking the secrets of the audit analyses the effects of recent changes to auditor reporting standards, which became applicable in many parts of the world from the December 2016 year-end audits. To do so, the report examines 560 audit reports across eleven countries and four continents.

The most obvious change has been the introduction of key audit matters which, in response to calls from stakeholders for more detail about the audit process and greater transparency and clarity of the audit report, requires the auditor to list the areas of the audit that involve the most risk and explain the audit approach to those areas.

In addition, the revised standards re-order the audit report to prioritize information that is most relevant to users, and improve the disclosure requirements around ‘going concern’ issues.

The report finds that these standards have resulted in the provision of better information for investors, and have also encouraged improvements throughout the financial reporting chain.

“In addition to being useful for investors, ACCA’s report has shown widespread benefits resulting from the adoption of key audit matters, including better governance, audit quality and corporate reporting”, said Andrew Gambier, head of audit and assurance at ACCA.

“As these benefits are significant contributors to better financial reporting more generally, it is important that audit firms are given encouragement to improve their implementation of the standard, through proportionate and sensible regulation”.

Key audit matters

Source: ACCA

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