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The revisions to ISA 700 (UK and Ireland) "The Independent Auditor’s Report on Financial statements” require auditors reporting on companies which apply the UK Corporate Governance Code to explain more about their work. The revisions received strong support during the consultation process and are therefore being adopted with only minor amendments.
Nick Land, Chairman of the FRC’s Audit and Assurance Council said: “I am pleased that auditors as well as investors have given their enthusiastic support for the proposal in the Consultation Paper to supplement the binary pass/fail model of audit report. The provision of a fuller description of the work the auditor has undertaken will give far more insight to investors than the binary pass/fail model of the current audit report. The improved report will be a better basis for engagement by investors with companies, and we encourage auditors and companies to work together to develop succinct communication to do so.”
What the FRC is asking auditors to do
Timing
The revised standard is designed to complement changes made to the UK Corporate Governance Code in October 2012. Accordingly it is effective for audits of financial statements for periods commencing on or after 1 October, 2012.
To provide practical support, the FRC's Financial Reporting Lab is running a project for companies and investors on the reporting of Audit Committees in annual reports which will address the interaction with auditor reporting.