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Published 28 September 2012 10:52, Updated 01 October 2012 05:00
The Australian Auditing and Assurance Standards Board says there have been questions about the value and relevance of audits. Photo: Tamara Voninski
Businesses and their auditors may have to spend more time and money preparing financial reports under new proposed standards.
Since the global financial crisis there’s been a international push to improve the way financial reports are prepared. The body that sets auditing standards in Australia is now following international advice to toughen up auditing standards.
“There’s been questions about the value and relevance of audit; do they give us enough value or do we need to improve auditing standards?” says Australian Auditing and Assurance Standards Board chairman Merran Kelsall.
She says the International Auditing and Assurance Standards Board released a proposal to include increased audit commentary around the audit process and reasons for judgments. Her board is now seeking business feedback on the proposal.
Kelsall says she believes it will be controversial as it may involve auditors giving more opinion. “The proposal that auditor commentary be included is a controversial one,” she says. “Both auditors and CFOs, or other management who are preparing financial statements, are saying that the auditor should only draw attention to something disclosed in financial statements.
“But these proposals are going a step further. There would be insights from the auditors that would give more information about either the audit itself, judgments about a valuation, or commentary about procedures they undertook in certain areas. It’s going beyond standard information that the auditor provides today, to opinion.”
Kelsall points out that such a move would not only involve work for the auditor, but could also be a time-consuming and costly process for business.
“What we are trying to do is understand the impacts on business,” she says. “We will look at the benefits and the costs – try to balance those and come up with a solution that will work.”
IAASB chairman Arnold Schilder, who will be in Australia next week to discuss the issue, says the changes are needed. “More than ever before, users of audited financial statements are calling for more pertinent information to inform decision making in an increasingly complex global environment,” he says. “These changes seek to address this demand and enhance the audit function.”
The proposal is open for consultation until October 8.