Evaluation of the New Expanded Auditor's Report Format's Impact

The new expanded format of auditor's reports, implemented internationally by the IAASB, aimed to increase the value and relevance of audit reports for stakeholders. This report assesses the effectiveness of these changes, considering key aspects such as enhanced professional skepticism, improved communication between stakeholders and auditors, and clearer disclosures of materiality and audit scope. The analysis includes real-world examples, like those from Marks and Spencer and Intermediate Capital Group, where auditors were recognized for transparent reporting. The report also examines the inclusion of engagement partner names, descriptions of auditor and management responsibilities, and the disclosure of relative benchmarks for materiality. Furthermore, it considers the impact of revisions to various ISAs, including ISA 700 (Revised) and ISA 701, and the positive reception from investors who sought greater assurance on financial statements. However, it also acknowledges areas for potential improvement, such as providing more detailed information on sensitivity ranges used in testing and auditors' views on management's assumptions. The report draws on various research papers and publications from auditing bodies like the FRC and IAASB to support its arguments, ultimately evaluating whether the new format has achieved its objectives.

NEW FORMAT OF AUDITOR’S REPORT
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In relation to whether the new extended format of audit reports worked, important points have
been taken into consideration;
There was a time when regulators, shareholders, investors, auditors and prepares complained that
the audit reports were too long and also the audit committees want to clearly indicate the value
and importance of audit reports. Firm such as PRICE WATER COOPER (PWC) generally use to
insert a lengthy description of audit risk in their audit report. So, material changes have been
made in the auditor’s report which has been implemented internationally by IAASB. According
to Christensen et al. (2018, p-65), the main objective of the IAASB was to increase the value of
the auditor's report, and also provide the stakeholders with a quality report. The new auditors
were issued so that the auditor’s report can be more relevant and informative to the users of
financial statement.
Findings and analysis:
 The new reports of auditor include all the important matters which are material from the
audit point and also help to enhance professional skepticism of auditors.
 As opined by Porumb et al. (2018, p-225), the new reports of auditor have increased the
communications between the stakeholders and the auditors and also between those
charged with governance and auditors.
 AS opined by Manes-Rossi (2018, p-187), the reports also give transparent, concise and
clear disclosures about materiality of audit reports and its scope and risk associated with
the report. It also includes the areas where some important assumptions and judgments
should be taken. For instance, the auditors of the company Marks and Spencer has been
rewarded from the investment association for providing clear and concise presentation of
material misstatement risk. Investment association also rewarded Intermediate capital
group auditors for clear disclosures of collateralized loan which were discussed by the
management.
 It also discloses the engagement partner’s name.
 It includes the description of auditor’s responsibilities and management responsibilities.
Auditors have to disclose the relative benchmark which they have applied for setting
materiality for the company financial statements. They also need to disclose the level of
percentage which they have applied to the benchmark. As per ISA 720(Revised), which
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has been approved by IAASB, the extended audit reports includes auditor responsibilities
regarding disclosures of other information which is inserted in company annual report.
 In words of Bumgarner and Vasarhelyi (2018, p-51), a separate section has been included
for any matter which was material and there was an uncertainty exists and need to be
adequately disclosed. This matter has to be disclosed under “ uncertainties which can
affect going concern”.
 It includes the important features of audit and also increases auditors responsibilities
 According to Downey et al. (2019, p-590), many ISA has been revised and modified such
as ISA 700 (Revised), ISA 705 (Revised), ISA 570 (Revised), ISA 706 (Revised), ISA
260 (Revised) and a new ISA has been introduced i.e. ISA 701 which is about
communicating important matters in independent auditors report. Also, different
amendments were confirmed related to other ISA.
 The investors and other stakeholders welcomed the new reports of auditor especially
those companies where there are limited sources of important information. It has been
found that the new report has provided assurance to the stakeholders about the reliability
and assurance of the financial statements.
 The investors advised that still there are some areas that need to be enhanced to improve
the quality of auditors report such as to give more detailed information of sensitivity
ranges which are used in testing, views on the assumption of management by auditors.
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References
Bumgarner, N. and Vasarhelyi, M.A., (2018). Continuous auditing—a new view. In Continuous
Auditing: Theory and Application (pp. 7-51). Emerald Publishing Limited. Available at
https://www.aicpa.org/interestareas/frc/assuranceadvisoryservices/downloadabledocuments/
auditanalytics_lookingtowardfuture.pdf#page=28 [accessed on 23rd march, 2019]
Christensen, B.E., Eilifsen, A., Glover, S.M. and Messier Jr, W.F., (2018). The Effect of
Materiality Disclosures on Investors’ Decision Making. Available at SSRN 3096564. :
https://www.nhh.no/globalassets/departments/accounting-auditing-and-law/working-papers/
cegm-full-manuscript.pdf [Accessed on 25th march, 2019]
Manes-Rossi, F., (2018). Is integrated reporting a new challenge for public sector
entities? African Journal of Business Management, 12(7), pp.172-187. Available at:
https://academicjournals.org/journal/AJBM/article-full-text-pdf/533DAA556630 [Accessed on
22nd march, 2019]
Porumb, V.A., Karaibrahimoglu, Y.Z., Lobo, G.J., Hooghiemstra, R. and De Waard, D., (2018).
Is More Always Better? Disclosures in the Expanded Audit Report and their Impact on Loan
Contracting. Available at
https://pcaobus.org/EconomicAndRiskAnalysis/Conference/Documents/Is-More-Always-Better-
Porumb-Hooghiemstra-Karaibrahimoglu-Lobo-Waard.pdf [Accessed on 22nd march 2019]
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