The UK Financial Reporting Council (FRC) has launched a consultation on the disclosures within the auditor’s report.

The consultation, Consultation Paper: Revision to ISA (UK and Ireland) 700, includes proposals that require the auditor to disclose information about the audit within the auditor’s report itself to enhance the value of audit for investors.

According to the proposals, the auditors should explain within the report how they applied the concept of materiality. They should
also specify which risks of material misstatements were identified and how this affected the audit strategy as well as give a summary of how the audit scope responded to these matters.

The FRC said the proposals have been made in response to report criticism and in the hope to influence the work of others seeking to enhance the communicative value of the auditor’s report; specifically the European Union and the International Auditing and Assurance Standards Board.

"The Consultation Paper proposes a step change from the traditional binary pass/fail model of audit report. Such reports have increasingly been criticised as being uninformative by investors, and other users of financial statements," FRC’s Audit and Assurance Council chairman Nick Land said.

Institute of Chartered Accountant in England and Wales executive director Robert Hodgkinson said there are "clear benefits of having consistent standards across countries. It is therefore important the FRC’s efforts are coordinated with international work in this area."

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Deadline to comment on the proposals is 30 April.

Related link:

Financial Reporting Council