The Auditing Practices Board (APB) has today published a Discussion Paper 'The Auditor’s Report: A Time for Change?' This paper results from extensive debate on the usefulness of current auditor’s reports within the Audit Quality Forum and comments received by the FRC in response to its recent paper 'Promoting Audit Quality'.

Reponses to 'Promoting Audit Quality' revealed a variety of views. Although the auditing profession was generally comfortable with the current approach, a number of user groups suggested changes to the format of the auditor’s report, taking the view that the current auditor’s report is overly legalistic and contains caveats and provisos that limit its usefulness. Some called for more radical changes - such as the introduction of narrative reporting to make the auditor’s report more informative in areas such as estimates, judgments, sufficiency of evidence and uncertainties.

The coming into force of the Companies Act 2006 will require changes to be made to the wording of auditor’s report in 2009. The Discussion Paper sets out how the new requirements might be reflected in the standard auditor’s report and explores whether other, more wide-ranging, changes should be made to the form and content of the auditor’s report.

Richard Fleck, Chairman of APB commented:

“Minor changes to the auditor’s report will be needed in 2009 to reflect new legal requirements. The APB believes that this is the right time to seek the views of companies, users and auditors on whether more significant changes should be made at the same time. Views on this subject will help to shape UK, European and world practices in the coming years”.

Comments on the Discussion Paper are invited by 28 March 2008. APB would prefer to receive letters of comment in electronic form, preferably in word format. These may be sent by e-mail to s.leonard@frc-apb.org.uk  

On 26 March 2008, the APB will be holding a meeting at which the content of the Discussion Paper can be debated. Persons wishing to be invited to such a meeting should advise Steven Leonard by e-mail at the above address.

The Discussion Paper can be downloaded from the Publications (Exposure Drafts) section of the APB's website (www.frc.org.uk/apb). Hard copies of the Discussion Paper may be obtained free of charge and post free from FRC Publications, 145 London Road, Kingston upon Thames, Surrey KT2 6SR. Telephone 020 8247 1264.

1. The Financial Reporting Council (FRC) is the UK’s independent regulator responsible for promoting confidence in corporate reporting and governance. Its functions are exercised principally by its operating bodies (the Accounting Standards Board, the Auditing Practices Board, the Board for Actuarial Standards, the Financial Reporting Review Panel, the Professional Oversight Board and the Accountancy & Actuarial Discipline Board) and by the Committee on Corporate Governance.
2. The APB is committed to leading the development of auditing practice in the United Kingdom and the Republic of Ireland so as to:
   • establish high standards of auditing;
   • meet the developing needs of users of financial information; and
   • ensure public confidence in the auditing process.
     
3. The Audit Quality Forum is a body that brings together representatives of auditors, investors, business and regulatory bodies. Its purpose is to encourage stakeholders to work together by promoting open and constructive dialogue in order to contribute to the work of government and regulators and by generating practical ideas for further enhancing confidence in the independent audit.
4. The FRC’s ‘Promoting Audit Quality’, which was published in November 2006, identified what it considered to be the drivers of audit quality and considered threats to those drivers. One of the drivers identified was ‘The reliability and usefulness of audit reporting’. The feedback paper on responses to ‘Promoting Audit Quality’ was published on 12 October 2007 and can be viewed at:
   http://www.frc.org.uk/about/promotingauditquality.cfm.
5. All press enquiries should be directed to: Jon Grant on 020 7492 2410.