The document outlines the changes to the auditor's report aimed at improving communication between auditors and entities, enhancing focus on key risk areas, and clarifying responsibilities. Key Audit Matters (KAM) are introduced to provide entity-specific information, which is particularly mandatory for listed entities. The overall goal is to enhance audit quality, professional skepticism, and the relevance of the audit report to users.

1. IAASB New Auditor’s Report
James Gunn
Managing Director, Professional Standards

2. Why Change the Auditor’s Report?
Stimulate more robust
interactions and
communication
between auditor and
entity
Enhance preparer focus
on key risk areas
and disclosures
Enhance communicative
value to users
Clarify responsibilities,
and improve
understanding of audit
Improve audit
quality and
professional skepticism
Improve relevancy of audit

3. The Global Journey
2013
2014
2015
2016
2017
Enhanced reporting by auditor,
management and TCWG (2013)
Enhanced auditor reporting
for PIEs (2014)
Some “early birds” with new style
audit reports under the ISAs
including KAMs
ISAs come into effect for
Dec 2016 year ends
Mandatory ‘dry runs”
Re-Proposed
auditor reporting
standards
EU – Enhanced auditor
reporting for all PIEs come
into effect (2017)
(May 2016)

4. The New ISAAuditor’s Report – What’s Changed
Key Audit Matters
Matters
communicated with
TCWG
Matters that required
significant auditor attention
Matters of most significance in
the audit
• Required for listed entity
audits, voluntary for
others
• Areas of higher risk,
significant auditor
judgement, matters of
significant affect on
audit
• Communication: why
matter is a KAM, how
addressed, related F/S
disclosures
• Documentation: Auditor
judgements & decisions
on KAM

5. KAM – Delivering Entity-Specific Information to Users
Consistency
and
Comparability
Relevance and
Usefulness
Boilerplate,
generic
language;
not relevant to
the entity or audit
Entity- and
audit specific
information of
increased value

6. Other Key Features of the New Auditor’s ReportAuditor’sReport
Audit Opinion – Required to be presented first
Key Audit Matters – Required for listed entities
Going Concern – Additional focus
Other Information – Enhanced work effort and new section
Responsibilities – In the audit; Independence and ethical
obligations; Engagement partner (listed entities)

7. What We Are Hearing…
“Now much more
engagement
between auditor
and management”
Some initial evidence of
enhanced audit quality, also
benefits to corporate
governance
“Valued new source
of complementary
information”
“Positive experience!”
“Visually appealing
reports, information
clearly signposted,
clear and logical
structure”
Start early, bring
management and
corporate governance
on the journey
“Write with the
audience in mind”
a
Innovative approaches
welcomed!

8. Enhanced Auditor Reporting and Audit Quality
Process
OutputsInputs
Audit
Quality
TCWG
Auditor
Manage-
ment
Users
Regul-
ators
Interactions
Diagram extracted from:
A Framework for Audit
Quality: Key Elements that
Create an Environment for
Audit Quality
February 2014

9. Implementation Resources
• Auditor Reporting Fact Sheet
• Auditor Reporting “At a Glance”
• Basis for Conclusions
• Guidance on KAM and Going Concern
• Illustrative KAM examples
• Targeted publications, e.g., “More
Informative Auditor’s Reports – What
Audit Committees and Finance
Executives Need to Know”
….And More

10. …A Beginning of a Journey

11. ISAs fit for
purpose
Transparency &
audit quality
Independent
and challenging
skeptical mindset
Continuing Improvement to Meet the Public Interest
Proactive
quality
manage-
ment
Reinforcing
robust
communic-
ation

12. www.iaasb.org