KPMG has welcomed proposals from the International Auditing and Assurance Standards Board (IAASB) to expand the auditor’s report giving increased information on matters the auditor determines to be of most significant in the audit.
Larry Bradley, global head of audit for KPMG International, said: ‘Users of financial statements are telling us they want to derive more value from the audit and that the traditional pass/fail model of the auditors’ report is no longer giving them sufficient information. The IAASB’s proposals are an important first step towards better meeting the needs of users who want more insight into the audit that was performed than is possible under the current reporting model.’
Bradley indicated that it will be important for the IAASB to evaluate user reaction to the expanded report. He added: ‘A critical part of the IAASB’s post-implementation review will be to understand if the information reported as key audit matters meets the needs of users and whether further enhancements are needed.
‘Further, we believe there is a case for providing added value by expanding auditor assurance beyond the financial statements, to include financial and non-financial information presented outside the financial statements that are used by investors, such as management discussion and analysis, earnings announcements or periodic disclosures of key performance indicators.’
KPMG supports enhanced disclosures in the financial statements and the auditor’s report relating to key judgments made about whether or not a material uncertainty relating to the going concern basis of accounting exists. However, KPMG does not support the proposal that a statement on ‘going concern’ should be included in the auditor’s report even when there is no doubt over a company’s ability to continue as one.
‘We believe that statements relating to the use of the going concern basis of accounting and material uncertainties would be more informative to users if they were only included when an issue with respect to going concern has arisen,’ said Sylvia Smith, partner in KPMG’s International Standards Group based in London.
Bradley concluded: ‘The implementation of change works best when there is alignment of the goals of all stakeholders. We recognise that the IAASB does not set rules that govern reporting by management and those charged with governance.
‘We believe, however, that it is important that the IAASB encourages jurisdictions that adopt its standards to also consider implementing requirements for management and those charged with governance to report on matters that were of most significance in the discharge of their responsibilities. This will help to better align the reporting responsibilities of management and those charged with governance with those of the auditor in respect of reporting key audit matters.’