The industry’s think-tank on audit quality, the
Quality Forum, is set to propose a consultation document, which proposes
fundamental changes in the way an audit report will be completed.
Under the plans, auditors may have to provide an explicit opinion as to
whether a company kept proper records. Auditors currently make
this note in their reports, if records kept are inadequate. This change, in
particular, will have to be considered by a legal body and definitions of what
‘adequate’ records are will also have to be decided in consultation with
A source familiar with the matter said that the records disclosure was a key
AQF sources declined to comment on the specifics of the document this week.
Sumita Shah, manager of the AQF’s auditing and assurance faculty, the working
group involved in writing the document, said the proposals will fundamentally
change the way the audit report looks. ‘We recommend a change in the opinion
wording so that it is structured in line with three distinct parts, which are
proposed in the companies bill.
‘We also recommend making audit reports more reader-friendly. The opinion
should also be pulled further up front and should have language which does not
contain unnecessary terminology,’ said Shah.
‘Investors seem to think that the audit report is currently a boiler plate,
as it is not company specific. They also find there is a lot of terminology and
language, which makes it difficult to read.
‘While we are considering ways of helping to provide investors with more
assurance, these are just proposals at the moment,’ added Shah.
The document proposing the changes will be sent to AQF members, which include
investors, auditors, the Department of Trade and Industry and the Confederation
of British Industry, tomorrow.
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