NEW AUDIT REPORTS ARE HERE

Audit reports issued for periods ending on or after 15 December 2016 will look different from audit reports issued prior to that date.  For listed entities, the differences will be particularly marked.

The key changes that will apply to all audit reports are:

  • Presenting the audit opinion at the beginning of the audit report
  • An increased focus on going concern matters
  • Increased and enhanced information on the auditor’s responsibilities
  • A new section on the auditor’s work in relation to other information in the annual report. 

The primary changes in relation to going concern matters are:

  • A new requirement for the auditor to evaluate the adequacy of disclosures in “close call” situations (situations where events or conditions were identified that may cast significant doubt on the entity’s ability to continue as a going concern, but after considering management’s plans to deal with these events or conditions, management and the auditor concluded that no material uncertainty exists)
  • Where there are material uncertainties in relation to going concern, a requirement for the audit report to highlight the existence of those uncertainties and to include, if the disclosures are adequate, a specific paragraph drawing attention to those disclosures, or, if the disclosures are inadequate, a modified opinion
  • A new requirement for the auditor’s report to include descriptions of the responsibilities of the auditor and management in relation to going concern.

For listed entities, there is also a new requirement to communicate key audit matters, which are those matters that, in the auditor’s judgement, were of most significance in the audit of the current-period financial statements.  The audit report will need to identify the key audit matters and, for each identified key audit matter, provide a clear, concise, understandable and entity-specific description of the matter.  That description will be required to state why the matter was considered to be one of most significance in the audit, explain how the matter was addressed in the audit and reference any related disclosures in the financial statements.

Chartered Accountants Australia and New Zealand has undertaken an analysis of early adopters of the new audit reports in Australia and New Zealand.  We’ll have a look at that analysis in a future edition of Accounting Alert. 

For more on the above, please contact your local BDO representative.