Auditor’s Reports Will Soon Look Different

Auditor’s reports will look different for audits of financial statements for periods ending on or after December 15, 2020.

The AICPA Auditing Standards Board has issued a standard related to auditor reporting, including amendments addressing disclosures of financial statements. The standard significantly changes the form and content of the auditor’s report. The standard also addresses the auditor’s responsibility to form an opinion on the financial statements. The auditor reporting will benefit users of audited financial statements by placing the auditor’s opinion at the front of the report for added visibility and providing necessary transparency into the basis for the auditor’s opinion and the responsibilities of both entity management and auditors.

The following summarizes the most significant changes:

• Requires the “Opinion” section to be presented first in the auditor’s report, followed by the “Basis for Opinion” section.

• Requires the “Basis for Opinion” section of the auditor’s report to include an affirmative statement about the auditor’s independence and fulfillment of the auditor’s other ethical responsibilities in accordance with relevant ethical requirements relating to the audit.

• Requires the auditor to report the auditor’s consideration of an entity’s ability to continue as a going concern.

•  Communication of Key Audit Matters (KAMs) would not be required. However, if the terms of the audit engagement include reporting KAMs, the auditor would be required to communicate KAMs.

• Requires the auditor to report the auditor’s responsibilities relating to other information included in annual reports if applicable.

• Expands the description of the responsibilities of management for the preparation and fair presentation of the financial statements and includes a requirement to identify those responsible for the oversight of the financial reporting process when those responsible for such oversight differ from those responsible for the preparation of the financial statements.

• Expands the description of the responsibilities of the auditor and key features of an audit.