CA Sri Lanka President says new Audit Report will improve transparency in financial reporting

In keeping with its continuing efforts to ensure the country was in line with international standards, the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) has taken steps to implement the new Audit Report from March 2018. 

The new Audit Report by the International Auditing and Assurance Standards Board (IAASB) of International Federation of Accountants (IFAC) has been designed to enhance auditor’s reports for investors and other users of financial statements.

CA Sri Lanka President Lasantha Wickremasinghe said that the new and Improved Auditor’s Report will enhance transparency in the field of financial reporting. He said that the changes will substantively change the auditors’ reporting and there would be anticipated benefits. 

“There will be many benefits in the new audit report, such as enhanced communication between auditors and investors, as well as those charged with corporate governance, increased user confidence in audit reports and financial statements, increased transparency, audit quality, and enhanced information value, increased attention by management and financial statement preparers to disclosures referencing the auditor’s report, renewed auditor focus on matters to be reported that could result in an increase in professional scepticism, enhanced financial reporting in the public interest which means the improved auditor’s report will enhance the transparency in financial reporting as a whole,” Wickremasinghe said. 

He also added that increasing the communicative value of the auditor’s report is critical to the perceived value of the financial statement audit. 

The improved auditor’s reporting through new and revised auditing standards increases the transparency and confidence in the audit and financial statements. IAASB released its new and revised auditing standards that designed to significantly enhance auditor’s reports for investors and other users of financial statements. Subsequently, the Sri Lankan Auditing Standards Committee made recommendations to the Council of CA Sri Lanka to adapt to those changes, following which a decision was taken to make effective the new and revised auditing standards will be effective for audits of financial statements for periods ending on or after 31 March 2018.

The new international audit related reporting standards was released following several years of development. This applies to audits of complete sets of general purpose financial statements of listed entities.

One of the key enhancements in the new requirement for auditors of financial statements of the listed entities to communicate is the ‘Key Audit Matters’ (KAM). KAM are that the auditor views as most significant, with an explanation of how they were addressed in the audit. This change adds more transparency in the auditor’s report about the auditor’s work. 

With the new and revised auditing standards coming into effect, CA Sri Lanka, in its capacity as the sole promulgator of accounting and auditing standards in the country has been conducting a series of awareness programs amidst stakeholders, to help educate them on the latest changes, and ensure they are aware of the new standards that is coming into effect both at a local and global level. 

The Audit Faculty of CA Sri Lanka has launched a series of awareness programs over the past few months, targeting practicing members, finance executives, while another program has also been organised targeting board of directors including audit committee members, to promote and educate them on these standards and facilitate their effective implementation in order to achieve the enhanced transparency in financial reporting.