An update for P7 students on Key Audit Matters (P7 INT)Candidates preparing for P7,Advanced Audit and Assurancewill be aware that the auditor’s report is the key output of the audit process, used to communicate primarily with the shareholders of the audited entity, as well as other stakeholders.Recently, there have been some considerable changes in the requirements relating to auditor’s reports, with the regulatory bodies issuing new and revised International Standards on Auditing and other supplementary guidance.
An update for P7 students on Key Audit Matters (P7 INT)The objective of this article is to outline the key changes, focusing on the new requirements relating to the Key Audit Matters paragraph for P7 International candidates, and Extended Auditor Reporting for P7 UK and Ireland candidates. It should be read in conjunction with the article entitled ‘The new auditor's report’ (see ‘Related links’), which is relevant for both F8 and P7 studentsand serves as an introduction to the issue.
An update for P7 students on Key Audit Matters (P7 INT)The detail of the changes outlined below in relation to Key Audit Matters are relevant to P7 (INT) candidates from the September 2016 exams onwards.P7 UK and Ireland candidates should note that the UK’s Financial Reporting Council (FRC) did not adopt the new ISA requirements into UK standards until June 2016, therefore ISA 701 (UK and Ireland) will not become a UK and Irish examinable documents until September 2017. However, candidates should be aware that the FRC Invitation to Comment on the IAASB Exposure Draft Reporting on Audited Financial Statements: Proposed new and Revised International Standards on Auditing, which includes the original proposals of the ISA 701 requirements, is examinable as a current issue in the exam year commencing September 2016.Further, candidates sitting the UK exam are expected to understand the Extended Reporting requirements that are expected in the UK and these are discussed below.
BACKGROUND TO THE CHANGES TO IAASB STANDARDS IN RELATION TO KEY AUDIT MATTERSIn 2015 the IAASB issued a range of changes to auditor reporting, with the objective of enhancing auditor’s reports for investors and other users of financial statements. According to the IAASB, research and public consultations indicate that enhanced auditor reporting is critical to influencing the perceived value of the financial statement audit. The auditor’s report is the key deliverablecommunicating the results of the audit process. Investors and other financial statement users have asked for a more informative auditor’s report—in particular for auditors to provide more relevant information to users.
BACKGROUNDTO THE CHANGES TO IAASB STANDARDS IN RELATION TO KEY AUDIT MATTERSThe IAASB suggests that the intended benefitsof enhanced auditor reporting include the following:•Enhanced communication between auditors and investors, as well as those charged with corporate governance.
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- Fall '19
- Financial audit