A review of expanded disclosures
The financial upheaval first unleashed by the Global Financial Crisis of 2008-09, and the resulting economic turbulence and uncertainty which has lingered throughout the last decade, brought the role of audit to the fore. How can auditors play a more effective role in promoting good company stewardship?
This driving question has led us to enhanced audit reporting today. In brief, it places a greater focus on sharing information with all stakeholders around the discussions and perspectives of external auditors and Audit Committees.
Enhanced audit reporting and disclosures of key audit matters (KAM) facilitates deeper dialogues between management, Audit Committees and board directors on the work of the auditor, their insights, and judgment. This dialogue is a critical element of the governance that is important to the financial reporting process of companies.
We conducted a study to understand how KAM was being implemented in various developed markets such as Australia, the United Kingdom, Hong Kong and Singapore, and considered the experience of Singapore companies in the first year of its implementation. We also examined in detail the most common KAM reported for specific sectors, and identified certain sector-specific characteristics that may have contributed to the KAM reported.
Looking beyond just publicly available information, we also held a roundtable with The Business Times in Singapore to discuss the pertinent issues with CFOs, Audit Committee Chairs, regulators and investors.
We found that, among countries which had adopted EAR before December 2017, most issuers have moved beyond the historic ‘boilerplate’ style of reporting in the subsequent year of implementation. We also observed a fairly consistent average number of KAM, and types of KAM issued across various countries which are adopting this for the first time, including those in Australia and Hong Kong.