The new generation of extended audit reports includes information on important aspects of a company’s financial statements and their audit. This information is an innovative shift in the responsibility of auditors to provide information to shareholders.1 Historically, in the United Kingdom (UK), the Companies Act 1900 required an annual audit for all listed companies.2 In the United States (United States), mandatory audit statements until 1934, when the New York Stock Exchange required registrants to submit an annual audit report, including standard paragraphs on the scope of audits and opinions. . Since then, the gradual change in auditing standards have allowed auditors to make unprecedented (i.e., “pure”) but unforgivable changes, with adverse conditions, discharges, and opinions. However, for the most part, most companies listed on the major stock markets receive standardized opinion polls. In this article, I look at reports that have been extended to various jurisdictions, why they became mandatory, what the evidence for their implementation is, and whether they met the expectations of regulators and other stakeholders. I also highlight several interesting research opportunities for academics and provide information for regulators and auditors.
Over the past two decades, three factors have fundamentally changed regulators around the world about the content of the audit report. (Vanstraelen et al. 2012; Asare and Wright 2012; Mock et al. 2013; Bédard et al. 2016; FRC 2013a; IAASB 2012; PCAOB 2012). First, following the 2008 financial crisis and previous high-profile corporate scandals, the public has lost some confidence in global capital markets and is increasingly questioning the credibility of auditors. Second, a wide range of users with financial savings felt there was a gap between the information they required and the information provided in the audit report.3 this information gap is one component of the larger difference between user opinions about the responsibilities of the auditor. And the auditor’s opinions. Procedures, goals, and responsibilities. Third, regulators and policymakers saw a growing need to revise the audit report to make it more relevant than a pass/fail opinion indicating whether a company’s financial statements meet accounting standards.
In response to the public’s demand for more audit information, the incremental reports address important accounting and corporate auditing issues. Following the latest rules issued by the United Kingdom Accounting Standards Board (FRC) and the International Auditing and Assurance Standards Board (IASSB), the Key Audit (CAM) (FRC 2020b, IAASB 2015b) on these matters, which are ‘. These issues were, in the auditor’s professional opinion, most important in the audit of the financial statements for the current period. Key audits are selected from cases communicated to those in charge of governance. “According to current rules issued by the US Accounting Standards Board (PCAOB), Critical Audit Matters (CAM) (AS 3107, PCAOB 2017 defined as any matter arising from the audit of financial statements that has been reported or is required to be disclosed with the Audit Committee and (a) regarding audits or information relevant to the audit, financial reporting and, (b) particularly challenging, subjective or complex audits of auditors. ‘ at the beginning of the text) and contain other jurisdiction-specific requirements (eg the scope and importance of the audit discussed in the UK (including the auditor’s stay in the US).
Enhanced reporting is intended to increase the content and usefulness of audit opinions, increase external oversight of auditors and management, and promote more open dialogue between auditors and users of accounting.5 These objectives include broad expectations that increased the audit information directly or indirectly. Users assess the financial reporting and audit quality of a company or significant risk (FRC 2013a; IAASB 2015d; PCAOB 2017; Gutierrez et al. 2018).
The transition from run/crash audit opinions to expanded reporting can be thought of as similar to mandatory vehicle emissions testing. Some owners want to know not only whether their car meets the minimum set of tests (i.e. pass/fail rating), but also how their car compares to others (i.e. the relative quality of accounting and auditing, even when ‘the auditor issued an unexpected opinion). However, the expectation of extensive reporting runs counter to the long-standing view that the auditor’s role is not to provide information; but to give an opinion on whether the financial statements present faithfully the financial position of the company following the required accounting standards.
The regulatory process to change the format of the audit report began around 2009 and continues to this day. In 2013, the FRC pioneered extensive reporting, with nearly 70 other jurisdictions adopting similar rules issued by the International Auditing and Assurance Standards Board (IAASB 2019). As an example of the underlying complex supervisory process, from 2020 onwards, the FRC, IAASB and PCAOB, and the US Securities and Exchange Commission (SEC) 2020 together received 1,037 letters from stakeholders commenting on preliminary negotiations. New and revised draft rules and analyzes after implementation. These regulators also participated in numerous public meetings and roundtable discussions that collected contributions from accounting firms, reporting agencies, investor representatives, professional associations, and academics.
I draw attention to the processes that lead an accountant
(1) Identify significant potential problems of KAM and CAM,
(2) Determine the language used to describe each item (ie the risks and how the auditor addresses them).
The definitions of KAM and CAM are quite similar, but the introduction of augmented reporting in jurisdictions with different regulatory, legal, and market environments varies considerably in the number, types, and accuracy of KAM and CAM. However, despite differences between jurisdictions, the language of current reporting requirements and regulatory guidance from the IAASB and PCAOB provides only a small window for auditors to release incremental information about unforeseen threats (i.e., “unknowns”) or financial quality. Reporting and auditing. Instead, it is relatively easy to comply with KAM and CAM requirements without publishing sensitive or new information.
Even if the auditors promise to use “company-specific” or “non-crime-related” language in their disclosures, the identification of KAM and CAM are among the matters presented to the audit committee (and usually published in other sections of the report). auditors’ annual) the company, that is, as important accounting policies and plans), follow a fairly generic process that is unlikely to reveal new information.
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