ACCA (the Association of Chartered Certified Accountants) has responded to the Financial Reporting Council’s (FRC) consultation on a revision to International Standard on Auditing (UK and Ireland) 700 The auditor’s report on financial statements.
UK members of ACCA’s Global Forum for Audit and Assurance debated the proposals and the views of its members are expressed in the response.
Welcoming the revision, David York, ACCA head of auditing practice said: 'These proposals are part of the implementation of the FRC’s Effective Company Stewardship proposals. The FRC wants auditors to explain in their report the major risks of misstatement they identified, what they did about them and how they applied the concept of materiality in the audit. This responds to calls from investors for information over and above the ‘pass or fail' auditor's opinion.
'ACCA has consistently supported the wider international initiative of the International Auditing and Assurance Standards Board (IAASB) to make auditor reporting more responsive to these investor demands. The FRC proposals can be regarded as aspects of 'auditor commentary', as proposed by the IAASB, so it is a contribution to the international debate as well as a national initiative.'
David York explained: 'Let's not make any mistake, the proposals are radical. No audit firm is making this sort of disclosure now. Standards are leading change, not codifying what is already going on. Investors are being asked to understand what the auditor says about complex issues such as materiality. It is really important that auditors and their clients get this right or investors may be short changed. We are calling on the FRC to allow time for education and proper consideration; it is not right to bring this in as is proposed for accounting years that are already well in progress.'
David York concluded: 'ACCA is disappointed that the FRC and the IAASB have not been able to move forward together on this. The FRC has a marked advantage because it is capable of steering both auditing and corporate governance, so change can be implemented quickly and uniformly; something that is not currently possible globally.'