Differing views among standard setters and policy makers on how auditor reporting should change put global consistency at risk and could result in investors not getting the information they need, says ICAEW.
The European Union, the International Auditing and Assurance Standards Board (IAASB), the US’ Public Company Accounting Oversight Board (PCAOB) and the UK’s Financial Reporting Council (FRC) all agree that something must be done to the way auditors report. However, they are out of synch with the timing and content of their proposals.
Robert Hodgkinson, ICAEW executive director, said:
The changes that have been or are in the process of being introduced to the way auditors report are unparalleled. It is important they achieve the objectives of enhanced transparency and communication about audit in the eyes of investors.
We would like to see international consensus on how the auditor report should change to prevent unhelpful duplication and overlap in years ahead. The inconsistencies between the different standard setters are therefore far from ideal.
The European Union is nearing the final negotiations on audit reform, while the UK’s FRC introduced new audit reporting requirements in the summer. The IAASB and the PCAOB are currently consulting on their auditor reporting proposals.
ICAEW is in a letter to the IAASB urging the international standard setter to re-double its efforts to ensure consistency around the world by engaging directly with policymakers, including in the EU.
The proposed changes to the auditor report come as a result of investors expressing a desire to understand more about what auditors have done, where the critical judgements took place and what they focused their time on.
Investors are a heterogeneous group with different needs. Responsibility also lies with them; they need to lead the way and speak up about their needs. Otherwise we risk auditor reports becoming little more than boilerplate and useful information drowning in a sea of irrelevant disclosures.
Regulators should focus on innovation in the way information is communicated rather than compliance to ensure investors get the information they requite to make informed investment decisions.