APB Publishes Draft Guidance For UK Auditors

by Jason Gorringe, Tax-News.com, London

24 May 2005

The Auditing Practices Board (APB) has today published Draft Bulletin 2005/4 entitled – ‘Auditors’ Reports on Financial Statements’.

This draft Bulletin updates, and brings together into one Bulletin, examples of auditors’ reports on financial statements that were originally published in SAS 600 and which have since been updated by subsequent APB Bulletins.

The specimen auditors’ reports included in the draft Bulletin take account of the following matters:

• The introduction of International Standards on Auditing (UK and Ireland).
• The inclusion in auditors’ reports of “emphasis of matter” paragraphs rather than “fundamental uncertainty” paragraphs.
• The adoption by the EU of IFRSs for the consolidated accounts of publicly traded companies.
• Changes to the reporting and accounting provisions of the Companies Act 1985.
• Changes to the corporate governance reporting requirements following the publication of the 2003 FRC Combined Code.

This is the first edition of the Bulletin referred to in paragraph 21 of ISA (UK and Ireland) 700 “The auditor’s report on financial statements”.

As discussed in Draft Bulletin 2005/3 the specific wording to be used in the auditor’s report when describing the financial reporting framework is still under debate. The wording used in the draft Bulletin is “those IFRSs adopted for use in the European Union” but there is a continuing discussion within Europe on the best term to use.

The APB favours a consistent approach to this matter within Europe and accordingly this Bulletin is being issued as interim guidance and the description of the financial reporting framework used in it may be changed if there is a European consensus for a different description.

Richard Fleck, APB Chairman observed:

“This Draft Bulletin is APB’s response to encouragement received from a number of our constituents to update and publish, in one convenient volume, the specimen auditors’ reports previously published in a variety of APB publications."

He added:

"The number of specimen reports reflects, in part, the complexity introduced into company law by having two financial reporting frameworks. The group accounts of a publicly traded group are required to be prepared under 'those IFRSs adopted for use in the European Union' whereas the parent company accounts can be prepared under UK GAAP. For many publicly traded companies the traditional auditor’s report covering both the group and parent company accounts is likely to be replaced by separate reports on the group and parent company accounts.”

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