Key features of enhanced auditor reporting

Significant changes apply to auditor’s reports of financial statements for periods ending on or after 15 December 2016.

Listed entities* Key standards

Key audit matters

  • New section in the auditor’s report
  • Matters that, in the auditor’s professional judgement, were of most significance in the audit
  • KAM selected from matters communicated with those charged with governance that required significant auditor attention in performing the audit, taking into account:
    • areas of higher assessed risk of material misstatement or significant risks
    • significant auditor judgements relating to areas of significant management judgement.
  • Inclusions: 
    • Reference to the related disclosure
    • Why the matter was considered to be a KAM
    • How the matter was addressed in the audit 
  • Exclusions:
    • Matters which requires the auditor to modify their opinion under ISA 705 (Revised)
ISA 701 (New)
ASA 701
ISA (NZ) 701

ISA 700 (Revised)
ASA 700
ISA (NZ) 700

ISA 260 (Revised)
ASA 260
ISA (NZ) 260

ISA 705 (Revised)
ASA 705
ISA (NZ) 705
Other information
  • New section in the auditor’s report on other information, which extends to the annual report
  • Management’s and the auditor’s responsibilities for other information
  • Identification of the other information
  • Statement that the auditor’s report does not cover other information
  • If received prior to auditor’s report being issued, the results of the auditor’s work, and if not received prior, when other information is expected
ISA 720 (Revised)
ASA 720
ISA (NZ) 720
 Name of engagement partner
  • Disclosed unless poses significant personal security threat
Australia: The Corporations Act 2001 already requires both the engagement partner’s own name and the name of their firm [s 324AB(3)] or the name of the audit company [s 324AD(1)].
ISA 700 (Revised)
ASA 700
ISA (NZ) 700

*Listed entities are defined in ISA 701 as an entity whose shares, stock or debt are quoted or listed on a recognised stock exchange, or are marketed under the regulations of a recognized stock exchange or other equivalent body 

  • Australia: Listed entities, more broadly defined than under the Corporations Act 2001, which defines listed entities as those included in the official list of ASX Ltd or other prescribed financial markets operated in Australia, but does not include those marketed by an exchange. 
  • New Zealand: Listed issuers from periods ending on or after 15 December 2016 and FMC reporting entities considered to have a higher level of public accountability, with KAM to be applied from periods ending on or after 31 December 2018. See: Implementation resources
All entities Key standards

Opinion section

  • First, followed by Basis of Opinion section
ISA 700 (Revised)
ASA 700
ISA (NZ) 700
Going concern
  • Description of the respective responsibilities of management and the auditor for going concern
  • Material Uncertainty Related to Going Concern - new section where a material uncertainty exists and is adequately disclosed in the financial statements, instead of emphasis of matter paragraph
  • Challenge adequacy of disclosures for close calls when significant doubt cast on the entity’s ability to continue as a going concern
ISA 570 (Revised)
ASA 570
ISA (NZ) 570

ISA 706 (Revised)
ASA 706
ISA (NZ) 706
Auditor independence
  • Statement about the auditor’s independence and fulfilment of ethical responsibilities, with reference to relevant Code of Ethics
Australia: Separate independence declaration required by lead auditor under s 307C of the Corporations Act 2001
ISA 700 (Revised)
ASA 700
ISA (NZ) 700
Auditor responsibility 
  • Description of auditor’s responsibilities and key features of the audit, which may be presented in an appendix or link to an appropriate authority’s website

Australia: AUASB Auditor’s responsibilities
New Zealand: NZAuASB Description of the auditor’s responsibilities

ISA 700 (Revised)
ASA 700
ISA (NZ) 700
Other information
  • Conditional inclusion of new section in the auditor’s report on other information as for listed entities, if other information has been received
ISA 720
ASA 720
ISA (NZ) 720


How is enhanced auditor reporting being embraced around the globe?

Changes to auditor reporting introduced by the International Auditing and Assurance Standards Board commence in December 2016. Jim Sylph, co-chair of the IAASB’s auditor reporting implementation working group, and Merran Kelsall, AUASB Chairman, explain the uptake around the world and the experiences of countries which have already implemented the changes and firms which have early adopted.

Early adopters' tips on implementing enhanced auditor reporting

KPMG were the first of the early adopters of enhanced auditor reporting in Australia. Having now issued enhanced auditor’s reports for a second reporting period, KPMG partners, Carolyn Ralph and Cameron Slapp, spoke to CPA Australia about their experience of implementing the new requirements. This podcast explores why KPMG chose to early adopt, whether they have found the new approach beneficial, how time consuming drafting key audit matters has really been and whether investors have taken notice. Leading into the first mandatory reporting period end, KPMG’s tips on implementation will help other auditors, who are implementing the new requirements for the first time, prepare for the change of approach.

Are you prepared for enhanced auditor reporting?

The most significant changes in auditor reporting in decades apply from 2016. The changes will have greatest impact on listed companies, but all auditor’s reports are effected. What’s behind the changes, what will they mean for directors, audit committees and investors and how are they being received around the world? CPA Australia’s Audit & Assurance Policy Advisor Claire Grayston discusses these issues and more with the architects of the new rules, including International Auditing and Assurance Standards Board Chairman, Prof. Arnold Schilder.