Key audit matters
A “stock take” of the New Zealand experience
Auditors have been required to extend the auditor’s report effective from December 2016.
The XRB and FMA have published the results of their joint analysis of Key audit matters – A stock-take of the first year in New Zealand.
As well as reviewing the auditor’s reports of 168 entities, the survey engaged directly with investors, preparers, directors and auditors.
The purpose of this publication is to provide insights into the experience to date to help improve New Zealand auditor reporting.
Take-up of the new requirements for extended auditor’s reports has been positive.
The analysis confirms that:
- Auditors have met the new requirements and, in many cases, have gone further and reported more than required.
- Directors have responded positively to the changes that are aimed at enhancing transparency.
- Users have had mixed responses to the revised auditor’s report as they become more familiar with the new auditor’s reports.
Variation in practice was found in the following areas:
- Reporting information about materiality;
- Reporting information about the outcome of audit procedures performed with respect to key audit matters identified;
- Some explanation of the audit scoping process.
Garth Stanish, FMA Director of Capital Markets said reporting of key audit matters for listed issuers became mandatory in December 2016 and are examined as part of our audit monitoring work, which is set out in the Audit Quality Monitoring report.
"It is particularly good to see some audit firms have gone above and beyond minimum compliance within the first year of the standards coming into force. This provides extra information to investors, and we encourage audit firms to continue to provide this further level of disclosure.”
XRB's Director of Assurance Standards, Sylvia van Dyk, says that the reporting of key audit matters is a significant change to the auditor’s report.
"The XRB has been and will continue to monitor the implementation of the reporting of key audit matters in New Zealand. This will then be used to inform a world-wide post-implementation review, focussing on implementation issues. It will also explore whether there are ways to further improve the quality of communication of KAM or further enhance transparency.”