Comparison Of New Auditor Reporting Standards With Old Standards In Essay.

Changes to auditor reporting introduced by the International Auditing and Assurance Standards Board commence in Australia from 15th December 2016. This is considered as the biggest revolution in auditing for decades. The new audit reporting rules (i.e., ASA 570, ASA 700, ASA 701, ASA 705, ASA 706, ASA 720) promise greater transparency, clarity and insights for investors and stakeholders. Around the world, 111 countries have adopted or committed to adopting new standards from the International Auditing and Assurance Standards Board (IAASB), designed to make auditors' reports more informative, transparent and revealing. 

The changes will have greatest impact on listed companies, but all auditors' reports are affected. KPMG were the first of the early adopters of enhanced auditor reporting in Australia, having now issued enhanced auditor's reports for a second reporting period. 

Select a listed company in ASX who is an early adopter of this new standard and 

(i) Discuss the changes in new auditor reporting compare to their previous audit report;

(ii) How this new auditor reporting will enhance the Qualitative Characteristics of Financial Information (SAC 3)?

 
List of some early adopters of enhanced auditor's reports: 

• AGL Energy Annual Report 2016

• ASX Annual Report 2016

• Cochlear Annual Report 2016

• Downer EDI Annual Report 2016

• QBE Insurance Group Annual Report 2015

• Suncorp Group Director's Report and Financial Statements 2015-16

• Telstra Annual Report 2016

• NZX Annual Report 2015 

Difference between new auditing reporting and old audit report

The main purpose of the assignment is to analyze the new auditing standards and compare it with the existing auditing standards (Acito et al., 2014). The company that is selected for this study is Telstra Corporation Limited that is an early adopter of improved or enhanced auditor reports. The current segment explains the changes or alterations that are made in the current auditing standards and presented to the auditor that is mentioned in the International Auditing and Assurance Standards Boar that held in Australia on the specified time (15^th December 2016). In this particular assignment, proper comparison has been made for explaining the difference between the new auditing standard as well as old auditing standard like ASA 700, ASA 701, ASA 570, ASA 720, ASA 706 and ASA 705. This present study highlights the new audit rules that are designed as it promises greater level of transparency and proper insights and clarity for the investors and shareholders at the same time. It was decided by more than 11 countries that showed interest in adopting the new audit standard from IASB as it was prepared for making the auditor report having access to more information, transparency and relevant matters. There has been plenty of change made in the new audit report and that had even affected the listed company’s workings in some of the positive ways. As far as audit firm are concerned, KPMG was found to be an early adopter of enhanced auditing reporting in Australia where they now issue enhance auditor reports at the time of second reporting period. In this study, there was proper explanation on the new auditor requirements and then comparing it with the previous audit report for the company taken named as Telstra Corporation Limited. The selected company is listed in Australian Stock Exchange as well as largest telecommunications and Media Company that aims at building on networks, markets voice, entertainment products and mobile internet access. The final segment highlights the facts on how new auditor reports can improve the qualitative characteristics of financial information as stated in SAC 3 (Arens, Elder & Mark, 2012).

ASA 570 (Going Concern)

Going Concern- Going Concern is mentioned in the Accounting Standard ASA 570.

The treatment of Going Concept in the old auditing standard was reported as an intrinsic value that was present in the audit report that had no separate section for reporting the aspect. On the other hand, after looking at the loopholes in the previous auditing standard, the treatment for Going Concern in the revised auditing standard was reported in a separate section under a separate heading as well as paragraph that ensure more transparency of information (Barton & Bruder, 2014).

ASA 570 (Going Concern)

Figure: ASA (570) old: Going Concern and the effect on audit reports simplified

(Source: Beasley, 2015)

Communicating key audit matters in the Independent Auditor Report is mentioned in the Accounting Standard ASA 701.

The treatment of Communicating key audit matters in the Independent Auditor Report in the old auditing standard was useful for audit only to AFS for given period of time in case where the key audit matters were not needed to be audited in a separate part of the audit report. On the other hand, after looking at the loopholes in the previous auditing standard, the treatment for Communicating key audit matters in the Independent Auditor Report in the revised auditing standard includes separate section in the auditor’s account that was effective for audits of AFS on or after 15^th of December 2016 (Boone et al., 2017).

Modification to the Opinion in the Independent Auditor Report is mentioned in the Accounting Standard ASA 705.

The treatment of Modification to the Opinion in the Independent Auditor Report in the old auditing standard excluded basis of opinion section for all types of auditor’s opinion rather it was only fir modified opinion. On the other hand, after looking at the loopholes in the previous auditing standard, the treatment for Modification to the Opinion in the Independent Auditor Report in the revised auditing standard included all types of auditor’s opinion under the heading modified opinion (Cannon & Bedard, 2016).

Emphasis upon Matter Paragraphs and other Matter Paragraphs in the Independent Auditor Report is mentioned in the Accounting Standard ASA 706.

The treatment of Emphasis upon Matter Paragraphs and other Matter Paragraphs in the Independent Auditor Report in the old auditing standard include section within the body of the audit report and expressed after the basis of opinion in case of unmodified opinion. On the other hand, after looking at the loopholes in the previous auditing standard, the treatment for Emphasis upon Matter Paragraphs and other Matter Paragraphs in the Independent Auditor Report in the revised auditing standard include section that is highlighted at the top after the addressee. In this, it is properly mentioned regarding the basis of opinion just like old audit report. In the opinion section, there was clear identification of entity that is being audited by stating the fact and disclaimer present as mentioned in the standard (De Santis, 2016).

Auditor’s Responsibilities relating to other information is mentioned in the Accounting Standard ASA 720.

ASA 701 (Communicating key audit matters in the Independent Auditor Report)

The treatment of Auditor’s Responsibilities relating to other information in the old auditing standard includes the section that there is difference in the section as well as remains as like before the auditor signature. On the other hand, after looking at the loopholes in the previous auditing standard, the treatment for Auditor’s Responsibilities relating to other information in the revised auditing standard include the section that explains no difference mentions in the section as well as remains same before the auditor signature (DeFond & Zhang, 2014).

Forming an Opinion and Reporting on a Financial Report is mentioned in the Accounting Standard ASA 700.

The treatment of forming an Opinion and Reporting on a Financial Report in the old auditing standard highlights the name of the appointment in association with the requirements that was mentioned in the audit report. On the other hand, after looking at the loopholes in the previous auditing standard, the treatment for forming an Opinion and Reporting on a Financial Report in the revised auditing standard explains the section where it explains facts in accordance to the requirements of ASA 700 (Earley et al., 2016).

There are several reasons identified where there was a need to revise the existing audit report to reduce or make the corrections as and when required. It is the new or revised audit report that aims at improving the communication between examiner as well as shareholders that charges with extreme trade supremacy (Eilifsen et al., 2013). In addition, the new audit report is beneficial as it had brought transparency in the information and audit quality that had enhanced or augmented in the information values. In that case, it is the revised auditing standards that help in increasing the contraction by business as well as financial statement preparers for revealing the references made to the assessor account. Therefore, there was a need for revised audit reports as it renew the assessor as it focus on matters that will lead to consequences for looking at the level of uncertainty of actions. It is the revised auditing standards that have the ability to augment financial treatment in the present course of action (Furnham & Gunter, 2015).

Telstra Corporation Limited is an early adopted of improved audit reports and this is the reason why this Australian company was selected for the present study (Telstra.com. 2017). Hence, the company deals with attaining excellence especially in corporate governance and bringing transparency and accountability at the same time. It is the company who aims at protecting the interests of the shareholders that are present in the business. It is the responsibility of the Board to look at the external auditor activities and constantly monitor their internal audit activities that are presented in the reporting systems.

ASA 705 (Modification to the Opinion in the Independent Auditor Report)

It was clearly mentioned in the Statement of Accounting Concepts (SAC 3) on matters relating to enhancing the qualitative characteristics of financial information in the new auditing reports. In this statement, the activities that was related was the financial coverage in relation to the initial reporting period and next reporting period at the same time. As mentioned in the new auditor report that was SAC 2, it clearly highlights the main objectives of general purpose of financial reporting that distinguishes the facts that was essential for conducting the verdict. The matter was directly linked or connected with the allotment of scarce possessions. Furthermore, it is the revised auditing standards that look at the matters on meeting the objectives of financial reporting where the users prepares such reports that explains ways for discharging the responsibility of the financial users. Consequently, the main purpose of Statement that highlights where it creates the qualitative characteristics where the financial information should be improved if it is to serve the exacting reason (Hayes, Wallage & Gortemaker, 2014). 

It is further important to understand the benefits of new or revised auditing standards as it properly signifies or highlights the qualitative characteristics of financial information that is prepared at the time of audit process. Here, it is noted that the main objective of the new audit report is to improve the communication worth and consequence as mentioned in the new auditor report where it is the amendment to the ISA that is used after preparing the structure as well as content at the same time.  Modification was essential in the existing audit report so that the new auditing report can accommodate with the improved financial reporting process while communicating with the other financial statement users in the business organization (Hribar, Kravet & Wilson, 2014).

The revised audit report measured as the key deliverable that tackles the major output at the time of planning for the audit process. In that way it is the new auditing standard has been prepared for escalating the level of confidence in the examination and fiscal statements that meets the requirement of public attention in some form or other. It was supposed by IASB that increased level of clearness as well as improved informational value will add worth to the new auditor report and alter to the auditor report has advantageous in wide variety of forms (Knechel & Salterio, 2016). There are various advantages that are identified in the new auditor report as it helps in enhancing the qualitative characteristics of financial information and some of these are mentioned below with proper justification:

ASA 706 (Emphasis upon Matter Paragraphs and other Matter Paragraphs in the Independent Auditor Report)

Enhanced Communication- It is important to consider the fact that the revised auditor report was prepared or drafted as it had enhanced the level of communication that was not present as much in the previous auditing standard. It is the new and revised auditing standards that have the ability to enhance in the level of communication that takes place between the auditors and investors that need alterations and changes in the near future (Louwers et al., 2013).

Increased attention- It is important to consider the fact that the revised auditor report was prepared or drafted as it had increase in the level of attention that was not present in the old auditing standard. It is the new and revised auditing standards is beneficial as that has the ability to increase the level of attention by the management as well as those who are in charge with domination like Audit Committee to the revelation of financial statements where indication are mentioned in the new or revised audit report (Porter, Simon & Hatherly, 2014)..

Renewed focus of the auditor- It is important to consider the fact that the revised auditor report was prepared or drafted as it had properly renewed the level of focus of the auditor who is involved in the audit process. It is the new and revised auditing standards that have the ability that can renew the level of focus of the examiner where matters necessitate to be reported that results in an augment in specialized uncertainty (Power & Gendron, 2015).

There are numerous impacts in the monetary coverage procedure after revising the auditing principles as it progress or increase in the qualitative characteristics of financial information (Zadek, Evans & Pruzan, 2013).  Addition to that, the enhancements to the auditor report aims at structuring upon the fundamental concepts of ISA audit where it tackle the fact on how risk-based review is performed as well as necessitate to be communicated with those who are charged with domination. It is the examiner that interact and presented in the auditor’s statement are knowable to be entity-specific in order to be revealing to users, it remains the responsibility of management, with the supervision of those charged with domination, to discuss applicable information to users about the unit and its fiscal arrangement, as well as providing sufficient revelation in conformity with the suitable financial treatment arrangement (William Jr, Glover & Prawitt, 2016).

Conclusion

From the above analysis, it is clearly mentioned that Telstra Corporation Limited is an early adopter of enhanced auditing standards and that is the reason why this company was selected. On the other hand, KPMG was the first early adopter of enhanced auditor reporting. In other words, it is now essential to highlight the issue statement that had brought improvement I the information that is presented to the auditor for the next financial reporting period where there need proper attention by the financial statement users in a business organization. In addition, in one of the statement, it was mentioned the fact on matters relating to on why KPMG select to early adopt with the enhanced auditing standards. The reason lies in the fact that the audit firm aims at establishing with implementing the proper approach that will be beneficial, easy and involve all the key audit matters that are taken into account. Consequently, this action had lead to a stage that covers the beneficiary financial treatment process for a specified period of time. Here, there is appropriate importance upon KPMG that works with other assessor so that they make notes for the new requirements that need to be presented in the new reporting standards. This was arranged in the way where techniques need to be selected in an effective way. The International Auditing and Assurance Standards Board (IAASB) Auditor Reporting page is the basis for tools and possessions to support consciousness, understanding and capable achievement of the new and revised Auditor Reporting philosophy. Therefore, the new and revised Auditor Reporting standards are proposed to expand auditor’s information for investor and financial statement users.

ASA 720 (Auditor’s Responsibilities relating to other information)

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