AUDITORS will have to tell investors more about their decision to sign off a company’s financial reports under rules issued yesterday.
The Financial Reporting Council has asked auditors of listed firms to explain the scope of their work in more detail and set out the risk of any misstatements in their reports.
The watchdog said it aims to make audits more transparent and informative for shareholders and company boards, in an attempt to restore trust in the role of auditors following the financial crisis.
Accountancy firms broadly welcomed the changes. “We do not believe that adopting these proposals will create excessive difficulties or risks for auditors,” said Hywel Ball, head of UK and Ireland assurance at Ernst & Young.
“However, this increased level of disclosure will obviously require additional preparation and review time on the part of the auditor, and it may require more discussions between the audit team and those charged with governance.”