WIREDGOV

Auditors continued to develop high quality, accessible reports in the second year of extended auditor reporting according to an FRC survey 'Extended auditor’s reports: A further review of experience'.

Investors have welcomed extended auditor reporting and the additional information it provides about the companies being audited.

The key findings from the survey include:

• Investors welcome the information included in extended auditor’s reports, and particularly for smaller companies where there tends to be less independent information available;
• The reports which have earned the greatest praise from investors tend to be well structured, signposting key information and often making innovative use of graphics, diagrams and colour;
• In general, auditors have continued to move away from generic language and descriptions of risk, making their reports more relevant and insightful;
• Descriptions of the scope of audit work and the approach to materiality continue to improve.

An increasing number of auditors now provide users of financial statements with an outline of what they have found in the course of their work. The FRC introduced new reporting requirements for financial years beginning on or after 1 October 2012 at the same time as enhancements to the UK Corporate Governance Code, including more detailed annual reporting by audit committees. They were designed to improve the level of investor confidence in and understanding of audit. The survey looks at the second year of experience.

Commenting on the survey, Melanie McLaren, Executive Director, Codes and Standards said:

“Confidence in UK audits underpins investor confidence in UK capital markets and we are pleased that we have led the way internationally in extended auditor reporting, which is being adopted more widely following changes to international standards on auditing.

"The FRC supports the continuing development of good quality auditor reporting and the trend towards more granular descriptions of risk, more transparent and accessible reporting of audit findings for assessed significant risks of material misstatement and the disclosure of performance materiality.”

Extended auditor’s reports: A further review of experience 
Summary for Investors: Extended Auditor Reporting

Notes to editors:

1. The FRC is responsible for promoting high quality corporate governance and reporting to foster investment.  We set the UK Corporate Governance and Stewardship Codes as well as UK standards for accounting, auditing and actuarial work.  We represent UK interests in international standard-setting.  We also monitor and take action to promote the quality of corporate reporting and auditing.  We operate independent disciplinary arrangements for accountants and actuaries; and oversee the regulatory activities of the accountancy and actuarial professional bodies.
   The FRC carried out a detailed analysis of 278 extended auditor’s reports from the largest FTSE 350 firms. The vast majority of these reports were published by the four largest audit firms. The survey also covers the views of investors, including those expressed at The Investment Association’s 2015 auditor reporting awards and considers how reporting may evolve in future
2. All Press enquiries should be directed to:

• Peter Timberlake, Head of Communications, on telephone: 020 7492 2397/ 07768 502332, or email: p.timberlake@frc.org.uk.
• Rita Carolan, Communications Manager, on telephone: 020 7492 2307/ 07428 149096 or email: r.carolan@frc.org.uk.
• Alana Sinnen, Communications Manager, on telephone: 020 7492 2395/ 07949 005526 or email: a.sinnen@frc.org.uk.