Thursday, September 17, 2015 7:00am / PwC Nigeria
Leading professional services firm PricewaterhouseCoopers (PwC) Nigeria has called on Nigerian companies and auditors to test run the new International Auditing and Assurance Standards Board (IAASB) auditors’ report model at least once before the required reporting period. The call was made at a recent breakfast meeting held by PwC for stakeholders, during which key changes to the auditors’ report model and the implications of the new model for boards, managements, regulators and auditors were presented.
Welcoming the participants which included senior finance executives, audit committee members and regulators drawn from various sectors of the economy, Uyi Akpata, Country Senior Partner PwC Nigeria and Regional Senior Partner for West Africa noted that PwC has always found it necessary to engage stakeholders on matters concerning financial reporting and noted that the session will be a first in the series as the country moves towards the December 2016 implementation period. He comments:
“The new IAASB standard is long overdue and a product of many years of discussions among stakeholders on how to make the auditor’s report better. The new model is exigent at this time when there is increased call even among the general citizenry for transparency, good governance and clarity in financial reports. This new model gives more insight into the auditing process and is sure to provide answers to many of the concerns raised over the years about audit reports.
At PwC we are committed to being at the forefront on issues such as this and will continue to engage stakeholders in open forums as well as through individual private discussions as we explore this new model and prepare to implement it in our audit reports.”
Tola Ogundipe, Partner and Assurance Leader for PwC Nigeria set the tone for the day’s session by briefly tracing the history of the new standard and highlighting some key areas the new model departs from the one currently in use. He comments:
“The new standard is the end product of a process that started in 2006 when the IAASB and the American Institute of CPAs (Certified Public Accountants) commenced a joint academic research to identify, and provide information and insights on user perceptions regarding the financial statement audit and the auditor's report among different classes of financial statement users. In January 2015, the IAASB released a set of new and revised auditor reporting standards to become effective for financial statements relevant for periods ending on or after 15 December 2016, though early application is permitted.
Essentially, the regulator’s objectives which informed the review revolves around enhancing the communicative value and relevance of the auditor’s report and modifying International Standards on Accounting (ISAs) to accommodate evolving national financial reporting regimes. We strongly advise as is our practice at PwC, that companies do at least one dry run with the new standards. This will enable them learn from the experience when actual reporting with it commences in December 2016.”
The key changes to the audit report were presented by Cyril Azobu, Partner at PwC Nigeria. He noted that the changes that the IAASB is introducing to the auditors’ reports centre around three key aims: insight, transparency and improved readability. The new standard also gives ‘Going Concern’ more visibility as it describes both the management’s and auditors’ responsibilities regarding going concern. Another feature of the new model is the emphasis it gives to ‘Key Audit Matters’ which must now be captured and reported by the auditor in the report. Cyril enumerated the content of the new reporting model to include; opinion, basis of opinion, and material uncertainty regarding going concern. Others are key audit matters, description of management’s responsibilities and auditors’ responsibilities. The presentation also featured some lessons learnt from the implementation in the UK which were mainly commendations for the new standard which is said to have made reports more interesting and informative with the Key Audit Matters section being identified as the most valuable section in the new report.
In concluding Cyril noted:
“The new auditor reporting standard will bring both opportunities and challenges. Clearly, there is a balance to be struck. The auditors’ reports need to respond to the spirit of the standards, with a user focus in mind. And auditors should be brave in confronting the cultural norms of boilerplate and overwhelming caution. But forcing the pace of change might have adverse consequences – especially in litigious environments – and this could result in a retreat back to boilerplate. Patience may be needed as the auditing world grapples with how to achieve informative and appropriately focused reports.”
The presentation was followed by a panel discussion. Among the panellists who were drawn from regulatory agencies in the financial sector were Mr Olutayo Philip of ICAN, The DG of the Securities and Exchange Commission represented by Mr. Sa’ad Abdulsalam , Mr George Onekhena, Deputy Commissioner Finance & Administration of the National Insurance Commission (NAICOM), Mr Wambai Umoru Director Finance & Accounts of the Corporate Affairs Commission (CAC), Mr Kolawole Balogun of the CBN, and Mr. Imeh Udofia of the National Pensions Commission (PENCOM). The discussion revolved around the implications for the new reporting standard from the regulatory point of view. They all commended PwC for taking the lead to educate stakeholders on the new standards and the need for compliance by all in order for the country to reap the benefits of the new reporting standard.
The question and answer session threw up a number of issues especially around the sensitivity of disclosures made by management which the auditor is required to report, the time implications of the new process vis-à-vis regulatory requirements and the need for more capacity building opportunities to prepare stakeholders for the impending change.
The breakfast meeting which held at the Oriental Hotel Lagos was well attended with over hundred participants from various sectors. It provided a huge opportunity for stakeholders to network and share ideas on the growth and advancement of financial reporting in the country.