The Financial Reporting Council of
Nigeria (FRCN) in its determined effort to entrench transparency and
probity in the nation’s financial sector has released Rule 9 bordering
on the application of International Standard on Auditing (ISA) 701,which
hinges on the need for Independent auditors to communicate Key Audit
Matters (KAM) in their report.
In a statement by the Executive Secretary
of the FRC Mr. Jim Obazee, the release of the “Rule 9” was in
accordance with sections 8(2) and 53(2) of the Financial Reporting
Council of Nigeria, Act No. 6 2011, (FRC Act, 2011).
According to Obazee, the scope of the
rule 9 which hinges on the application of ISA 701 deals with the
auditor’s responsibility to communicate key audit matters in the
auditor’s report, adding that it was intended to address both the
auditor’s judgement as to what to communicate in the auditor’s report
and the form and content of such communication.
He stated that the purpose of
communicating key audit matters was to enhance the communicative value
of the auditor’s report by providing greater transparency about the
audit that was performed.
He further explained that communicating
key audit matters provides additional information to “intended users” of
financial statements to assist them in understanding those matters
that, in the auditor’s professional judgement, were of most significance
in the audit of the financial statements of the current period.
He added that communicating KAM could
also assist “intended users” in understanding the entity and areas of
significant management judgement in the audited financial statements.
Obazee noted however that communicating KAM in the auditor’s report was not substitute for existing disclosure requirements by the Council among others:
Obazee noted however that communicating KAM in the auditor’s report was not substitute for existing disclosure requirements by the Council among others:
Disclosures in the financial statement
that the applicable financial reporting framework requires management to
make, or that are otherwise necessary achieve fair presentation;
Auditor expressing a modified opinion when required by the circumstances of a specific audit engagement in accordance with ISA 705 (Modifications to the opinion in the Independent Auditor’s Report- Revised);
Auditor expressing a modified opinion when required by the circumstances of a specific audit engagement in accordance with ISA 705 (Modifications to the opinion in the Independent Auditor’s Report- Revised);
Reporting in accordance with ISA 570
(Going Concern- Revised) when a material uncertainty exists relating to
events or conditions that may cast significant doubt on any entity’s
ability to continue as a going concern; or a separate opinion on
individual matters.
He maintained that Independent Auditors
shall comply with provisions of ISA 701 for audits of financial
statements and shall take effect on Decembers 15, 2016.
credit: Thisdays
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