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1.1
The auditors report is the instrument addressing the output of the audit
process; likewise, serving as the primary means of communication with an
entitys stakeholders. It is a short, standardized report that describes the
financial statements subject to audit, the audit itself, and the respective
responsibilities of management and the auditor.
For many years now, the auditors report has provided either a clean
(unmodified) or modified opinion with an explanation of the basis for such.
This long-standing report remains to be valuable; however, many believe
that this is no longer sufficient. Users of audited financial statements are
calling for more pertinent information for their decision-making. Moreover,
global financial crisis has urged the users, particularly the investors, to want
to know more about individual audits and to gain further insights into the
audited entity and as to how it is performing.
The International Auditing and Assurance Standards Board (IAASB)
embraced this need for change and released an exposure draft entitled
Reporting on Audited Financial Statements: Proposed New and Revised
International Standards on Auditing (ISAs) on July 25, 2013. The ED proposes
amendments to audit reports including the provision of more information on
how audits are performed. Along with the other revisions is the introduction
of a key audit matters section in the audit report on audits of listed entities
which were developed after an earlier research. These aim to include audit
findings and insights which are expected to enhance the auditors reports
and contribute to the ongoing relevance of the financial statement audit and
the public interest.
Numerous organizations have responded positively to these proposals and
international firms even field tested the new audit report model which
equally gained affirmative results. In addition, with the encouraging feedback
gained, it is likely that these proposed enhanced auditor report models are
months away from becoming an established international standard.
The adoption and application of this in the Philippines would then be
reasonable and without prejudice to the interest of the users of audited
financial statements, particularly the investors and stockholders, the entity
owners, and other interested parties. In the same positive manner, auditor
reports would be of greater value with the inclusion of the key audit
matters without encroachment of any ethical standards. Moreover, the
value of auditors would be a notch higher for these additional requirements,
in a way, would improve their competence, credibility, and professionalism,
thus,
giving
progress
and
highly
regarded
advancement
to
the
accountancy profession.
The main objective of this paper is to justify the reasonableness of the
application of this proposal not only internationally but most of all, on a local
perspective, i.e., its adoption and application in the Philippines.
1.2
The proposal for the proposed new auditing standard comes not without
any impediments. A table is provided below to sum up these issues with
corresponding recommendations.
ISSUE
KAMS will expose
EXPLANATION
The auditor has the
RECOMMENDATION
The reporting of the
confidential matters
responsibility of
of an entity.
communicating matters of
should be done on a
TCWG to be able to
standards,
choice on the
particularly
confidentiality.
the entity.
disclose.
The auditor should
financial disclosure/
information
overload.
of greater importance to
be included in the
information overload.
report. He should
likewise include hints
and signs which to
catch the readers
attention for them to be
able to focus on
significant areas in the
report. Guidance in
proposed standard.
The underlying concept
unnecessary
between these
because of existing
therefore a commonality
differences between
them should be
considered. With
thorough examination,
the proposed section
provides a lower
threshold of
communicating audit
findings and is of
An accompanying feature of
greater assistance.
This issue should not be
the new
viewed much as an
boilerplate
impediment because
audit in consecutive
findings likely to be
reported in consecutive
with them.
overtime.
Users may take key audit
in the FS.
communication to the
neglect comprehending on
the report.
create confusion as to
the auditors opinion.
1.3
Acknowledgement
This position paper is made possible with the assistance and support of