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The Future of Auditor Reporting Forum - Overview of IAASB Auditor Reporting Project and Key Changes

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The Future of Auditor Reporting Forum, held by Institute of Singapore Chartered Accountants …

The Future of Auditor Reporting Forum, held by Institute of Singapore Chartered Accountants

Sharing from Mr Hans Koopmans, Partner, PricewaterhouseCoopers LLP

Published in: Business, Technology

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  • 1. In partnership with PRICEWATERHOUSECOOPERS LLP The Future of Auditor Reporting – Shaping Communication and What It Means for You Wednesday, 23 October 2013 9.00 am 1
  • 2. In partnership with PRICEWATERHOUSECOOPERS LLP Overview of IAASB Auditor Reporting Project and Key Changes Hans Koopmans Partner PricewaterhouseCoopers LLP 2
  • 3. In partnership with PRICEWATERHOUSECOOPERS LLP Important disclaimer © 2013 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. PwC helps organizations and individuals create the value they‟re looking for. We‟re a network of firms in 158 countries with more than 180,000 people who are committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at www.pwc.com/sg 3
  • 4. In partnership with PRICEWATERHOUSECOOPERS LLP Agenda Global initiatives on auditor reporting Overview of IAASB proposals Other relevant IAASB initiatives Future timeline 4
  • 5. In partnership with PRICEWATERHOUSECOOPERS LLP Global Initiatives on Auditor Reporting 5
  • 6. In partnership with PRICEWATERHOUSECOOPERS LLP Global initiatives on auditor reporting Overview     6 The financial crisis triggered renewed focus on the auditor‟s report. Investors greatly value today‟s binary audit opinion but would like auditor‟s reports to give them greater insight into the audit and/or the entity‟s financial reporting. Debates have moved beyond whether the auditor‟s report will change. The focus is now on the nature and extent of changes and whether auditor‟s reports will remain consistent globally or whether different reporting models will emerge.
  • 7. In partnership with PRICEWATERHOUSECOOPERS LLP Global initiatives on auditor reporting Timeline of developments IAASB and PCAOB 2011 consultations and roundtables 2011 EC issues draft Audit Directive and Regulation with detailed audit report requirements November 2011 IAASB releases proposed direction for the future auditor’s report in June 2012 (Invitation to comment) 2012 UK FRC issues its new auditor reporting standard which became effective 1 October 2013 IAASB roundtables in NY, Brussels and KL in Sept/Oct 2012 IAASB response due 9 October 2012 PCAOB Exposure Draft released 13 August 2013 IAASB Exposure Draft released 25 July 2013 2013 Backdrop of continuing focus on audit regulation and competition 7
  • 8. In partnership with PRICEWATERHOUSECOOPERS LLP Overview of IAASB Exposure Draft 8
  • 9. In partnership with PRICEWATERHOUSECOOPERS LLP Overview of IAASB Exposure Draft Key statistics      9 One new standard One standard substantially revised Four standards with significant changes Four standards with conforming amendments ED including explanatory memorandum and all revised ISAs (markedup) is 200 pages (!)
  • 10. In partnership with PRICEWATERHOUSECOOPERS LLP Overview of IAASB Exposure Draft Key proposals    10 Introduction of a new section of the auditor‟s report describing “Key Audit Matters” The auditor‟s report to be expanded to include 3 conclusions: - Auditor‟s opinion on the financial statements as a whole - A dual-part conclusion on going concern - A statement as to whether any material inconsistencies between the audited financial statements and other information (e.g., the annual report) have been identified Additional wording and disclosures designed to provide greater transparency into the audit
  • 11. In partnership with PRICEWATERHOUSECOOPERS LLP Overview of IAASB proposals Key Audit Matters   A new section of the auditor‟s report, mandatory for listed entities and voluntary for other entities. Key Audit Matters are defined as: “Those matters that, in the auditor’s professional judgement, were of most significance in the audit of the financial statements of the current period. Key audit matters are selected from matters communicated with those charged with governance.” 11
  • 12. In partnership with PRICEWATERHOUSECOOPERS LLP Overview of IAASB proposals Key Audit Matters  Professional judgement would be used to determine which of the matters discussed with those charged with governance would be reported in the auditor‟s report as a Key Audit Matter, taking into account the following factors: – Areas identified as significant risks – Areas in which the auditor encountered significant difficulty during the audit, including with respect to obtaining sufficient appropriate audit evidence – Circumstances that required significant modification of the auditor‟s planned approach, including as a result of a significant deficiency in internal control  Intended to be entity- and audit-specific rather than boilerplate  Source of original information 12
  • 13. In partnership with PRICEWATERHOUSECOOPERS LLP Overview of IAASB proposals Going Concern  A further new section of the auditor‟s report, applicable for all entities and in all circumstances – that is, required statements are not conditional on any material uncertainty existing.  Proposed statements address: − An explanation of the „going concern basis of accounting‟ adopted in the preparation of the financial statements − Auditor‟s conclusion that the use of the going concern basis of accounting is appropriate − A statement that the auditor has not identified a material uncertainty that may cast significant doubt on the entity‟s ability to continue as a going concern 13
  • 14. In partnership with PRICEWATERHOUSECOOPERS LLP Overview of IAASB proposals Going Concern (cont’d) - A statement that neither management nor the auditor can guarantee entity‟s ability to continue as a going concern  The auditor‟s report will continue to prominently signal an issue relating to a material uncertainty when such circumstances occur  Financial reporting frameworks are not yet aligned  “Near misses” could be a potential Key Audit Matter 14
  • 15. In partnership with PRICEWATERHOUSECOOPERS LLP Other Selected Changes to ISAs 15
  • 16. In partnership with PRICEWATERHOUSECOOPERS LLP Other selected changes to ISAs     16 Disclosure of name of engagement partner Improved description of responsibilities of the auditor No inclusion of additional information on going concern, Key Audit Matters and other information when auditor disclaims an opinion Clarifying guidance if you have Key Audit Matters and Emphasis of Matters and/or Other Matters
  • 17. In partnership with PRICEWATERHOUSECOOPERS LLP One Other Relevant IAASB Initiative 17
  • 18. In partnership with PRICEWATERHOUSECOOPERS LLP One Other relevant IAASB initiative    18 The IAASB is in the process of revising International Standard on Auditing 720 “The Auditor’s Responsibilities Relating to Other Information in Documents Containing or Accompanying Audited Financial Statements and the Auditor’s Report Thereon” Exposure Draft issued in 2012 – extends auditor‟s responsibilities to read and consider other information (i.e., the annual report) for: – Consistency with the audited financial statements AND – The auditor‟s understanding of the entity and the environment acquired during the course of the audit Also extends scope to documents accompanying audited financial statements and the auditor‟s report thereon – not simply documents containing the audited financial statements
  • 19. In partnership with PRICEWATERHOUSECOOPERS LLP Future Timeline 19
  • 20. In partnership with PRICEWATERHOUSECOOPERS LLP Future timeline EU political process to approve Audit Directive and Regulation expected to extend into 2014 2013 20 IAASB response due 22 November PCAOB response due 11 December PCAOB roundtable planned 2014 June IAASB new auditor reporting standard expected to be finalised New IAASB auditor’s report comes into effect 2015 ? or 2016 ?
  • 21. In partnership with PRICEWATERHOUSECOOPERS LLP 21