New Standards on Audit Reporting for Company- myassignmenthelp

Question: Discuss about theNew Standards on Audit Reporting for Public Company. Answer: Key changes in the reporting requirements of the audit report Public Company Accounting Oversight Board is the regulatory body which is in existence to regularise the auditors of public companies. PCAOB adopts the new auditing standards on time to time basis as per the requirements of the changing market environment. It has announced the new auditing standards recently in order to widen the scope of audit reporting done by the auditors as a part of their audit engagement. The new standard aims at enhancing the quality of audit reports and making the reports more informative so as to raise the authenticity of the audit report in the eyes of intended users. Along with the previous reporting requirements PCAOB has directed the auditors of public companies to provide the additional information relating to the critical audit matters of the entity. Critical audit matters are those matters in which auditor has to apply subjective professional judgements during the audit engagement and requires communication of such matters to the audit committee (Chri stensen, Glover Wolfe, 2014). Also, the auditors conducting the audit under the standards prescribed by the PCAOB are required to disclose in the audit report, their audit tenure i.e. the date from which they have started giving professional services to the company on a consistent basis. PCAOB has introduced a new format to report and the changed format demands the auditors to state the fact that auditors are independent parties and hence their opinion is not influenced by any external factors (Ning Chiu, 2017). Auditors are also required to incorporate a new phrase in the audit report starting with the words as whether due to frauds and errors while describing their responsibilities in relation to provision of reasonable assurance about the true and fair view of financial statements. While reporting the critical audit matters auditors are also subjected to describe the considerations that enabled them to identify the matters as critical and the manner in which such critical matter s are dealt with. Similarity and Differences between the IAASB PCAOBs audit reporting approaches The International Auditing and Assurance Standards Board (IAASB) Public company accounting oversight board (PCAOB) pursues almost similar approaches to enhance the reporting requirement for the auditors as both the regulatory bodies are aimed to promote greater level of transparency in the financial reports of the company. The auditors are required to report on the key audit matters and the critical audit matters of only current financial year as per both the boards. Key audit matters are defined by IAASB as the matters holding high significance in the overall audit and are necessary to be reported to the investors to draw their attention. These matters requires communication with those charged with governance about the key concern. Whereas the critical audit matters are defined by the PCAOB. Even after the having the similar objectives in relation to auditing practices, the approaches followed by both the boards varies in terms of documentation requirements and other areas (IAASB, 2017). IAASB requires the auditors to document the matters which had seek auditors attention and the logical reasons for the determination as to whether a particular matter arising of audit is key audit matter or not. However, PCAOB sets out the requirement of identifying and reporting all the matters that were communicated to the companys audit committee no matter whether they were determined as critical audit matters or not. Further, PCAOB restricts the auditors to communicate to the critical audit matters in the cases where adverse opinion is being expressed (PCAOB, 2017). On the other hand, IAASB permits the auditors to communicate the key audit matters even when the auditor expresses adverse opinion. But in case where disclaimer of opinion is being provided by the auditors both IAASB and PCAOB restricts the reporting of the key and critical audit matters (Gramling, Krishnan Zhang, 2011) Reasons for the changes in the audit report and the analysis whether these changes are likely to achieve the aims The main objective behind the adaptation of new audit reporting standards is to promote more transparency in the audit reports so as to protect the interests of the shareholders and investors of the company. With the growing complexities of businesses of public companies and their audit procedures, the investors of the companies are constantly demanding the additional information by the means of audit report so that they can be acknowledged about the true financial position of the company. Moreover, due to the increasing complexities it was difficult for the intended users of the audit reports to understand the audit opinion of the auditors. Adaptation of such standards will be in the interest of company and all its stakeholders in terms of transparency. The compliance with the new standards will not only contribute to company and auditors good image in the eyes of investors and shareholders Hence these changes will bring the positive change in the audit reporting practices. Therefor e it can be said the changes brought through the introduction of new auditing standards will achieve their core purposes. Impact of changed audit reporting requirements on the audit practices The new audit reporting standards requires the auditors of the companies to apply extensive audit procedures in the areas where auditor finds the need of applying more complex and subjective auditors professional judgement. The investors demand for more informative and accurate audit reports will ultimately enhance the overall quality of audit practices conducted by the auditors as they will have to remain more focused towards their assurance services in order to earn investors trust (Christensen, 2016). The basic principle of auditors independence will gain more value in the new reporting framework as it is aiming at the protection of investors interest. Identification and reporting of critical audit matters will foster the communication between the auditors and audit committees of the company thereby enabling the auditors to understand the audit matters more precisely. References Christensen, B.E., Glover, S.M. and Wolfe, C.J., 2014. Do critical audit matter paragraphs in the audit report change nonprofessional investors' decision to invest?.Auditing: A Journal of Practice Theory,33(4), pp.71-93 Christensen, B.E., Glover, S.M., Omer, T.C. and Shelley, M.K., 2016. Understanding audit quality: Insights from audit professionals and investors.Contemporary Accounting Research,33(4), pp.1648-1684. Gramling, A.A., Krishnan, J. and Zhang, Y., 2011. Are PCAOB-identified audit deficiencies associated with a change in reporting decisions of triennially inspected audit firms?.Auditing: A Journal of Practice Theory,30(3), pp.59-79. Gunny, K.A. and Zhang, T.C., 2013. PCAOB inspection reports and audit quality.Journal of Accounting and Public Policy,32(2), pp.136-160. International Auditing and Assurance Standards Board, 2017, The New Auditors Report: A COMPARISON BETWEEN THE IAASB AND THE US PCAOB STANDARDS, Available at: https://www.ifac.org/system/files/publications/files/Auditor-Reporting-Comparison-between-IAASB-Standards-and-PCAOB-Standard.pdf (assessed on 28.09.2017). Ning chiu 2017, Briefing: Governance PCAOB Adopts Requirement to Disclose Critical Audit Matters in Auditor Reports,Available at: https://www.briefinggovernance.com/2017/06/pcaob-adopts-requirement-to-disclose-critical-audit-matters-in-auditor-reports/ (assessed on 28.09.2017). Public company accounting oversight board, 2017, PCAOB Adopts New Standard to Enhance the Relevance and Usefulness of the Auditor's Report with Additional Information for Investors, Available at: https://pcaobus.org/News/Releases/Pages/auditors-report-standard-adoption-6-1-17.aspx (assessed on 28.09.2017). Public company accounting oversight board, 2017, The Auditor's Report On An Audit Of Financial Statements When The Auditor Expresses An Unqualified Opinion And Related Amendments to PCAOB Standards, Available at: https://pcaobus.org/Rulemaking/Docket034/2017-001-auditors-report-final-rule.pdf (assessed on 28.09.2017).