In a report on the value of audit published last year (2014), Larry Leva, KPMG International’s Global Vice President for Quality and Risk management observed that the scope of audit had not changed “for 100 years”.
Audit, however, has been under active discussion since the 2008 financial crisis and there is widespread recognition among auditors that changes to its scope are long overdue.
Writing in Accountancy Ireland magazine in October 2010, Ronan Nolan, a Partner in Deloitte former member of the Auditing Practices Board and (then) President of Chartered Accountants Ireland, said that the value of audit reports would be enhanced by “more narrative, tailored comments” about the financial statements under review and about “the dialogue that had taken place between the auditor and the entity’s directors and management.”
Since then, the Financial Reporting (FRC) has introduced new requirements for auditor’s reports on companies subject to the UK’s Code of Corporate Governance that extend the information in audit reports. And, in March 2015, in Extended auditor’s reports – A review of experience in the first year the FRC published a detailed analysis of 153 extended auditor’s reports including 63 of FTSE 100 companies. The report suggests that auditors are meeting, and in some cases exceeding, the new requirements but there may be scope to go still further. Indeed the FRC expressed a hope that their review would act “as a catalyst to maintain the momentum of the initiative in the UK and Ireland” and would “have an influence on international practice as it evolves”.
In an April 2015 interview for Accountancy Ireland magazine, Conall O’Halloran (Head of Audit, KPMG Ireland) suggests there are opportunities to extend audit beyond the financial statements to other currently unaudited financial information such as trading statements and for auditors to provide assurance on a real time basis.
The extent to which such suggestions gain traction remains to be seen however the FRC review demonstrates that the most recent crop of audit reports are, if nothing else, a more interesting read than heretofore.