KPMG is to overhaul its approach to audit reports, going beyond the FRC’s minimum regulatory requirements for long form audit reports.
The Big Four auditor said it has ‘invited’ its listed client companies to include its findings in so-called ‘long-form’ audit reports, which are published in a listed company’s annual report.
The new method follows KPMG’s field-testing of the approach with three audits, including Rolls Royce Holdings, earlier this year.
“Until recently an audit report gave a binary yes/no opinion on a company’s accounts in heavily standardised, generic text. It was boilerplate and there was a lack of transparency as to the auditor’s more detailed findings behind the scenes,” said Tony Cates, UK head of audit at KPMG.
In 2013, the FRC issued new requirements for a so-called ‘long-form’ audit report which included what specific matters the auditor saw as the major risks at an individual company and what work the auditor had done on those matters.
“In three pilot audit reports we included commentary from the individual senior audit partner. This discussed qualitative matters in order to help give colour, depth, and emphasise areas of risk that concern management, audit committee and investors alike,” Cates said.
KPMG will be inviting client companies to take up its offer from today and is discussing its new approach with the wider stakeholder group, including major investors and regulators. In order to include the findings in the long form audit report, the client must engage the firm to do so before the work for the final annual audit commences.