Auditing Standards Board Releases Exposure Draft on Audit Reports

10 min read

In November 2017, the AICPA Auditing Standards Board (ASB) released three proposals related to enhancing the relevance and usefulness of audit reports on financial statements of nonissuers.  They also seek to converge with recently revised audit guidance promulgated by the International Auditing and Assurance Standards Board (IAASB) and the Public Company Accounting Oversight Board (PCAOB).

Once finalized and approved, the structure for audit reports would be substantially changed to provide more information about significant aspects of the audit.  For example:

  • Presenting the “Opinion” section first in the auditor’s report, followed by the “Basis for Opinion” section.
  • Modifying the “Basis for Opinion” section to further address requirements for an auditor’s independence and other ethical responsibilities.
  • Aligning audit report requirements with recently revised guidance related to the auditor’s responsibility for evaluating and reporting on an entity’s ability to continue as a going concern.
  • Expanding the description of management’s responsibilities by specifically naming those responsible for oversight of the financial reporting process (e.g., the audit committee, or those charged with governance).
  • Expanding the description of the auditor’s responsibilities.
  • Clarifying the auditor’s responsibilities related to other information included in annual reports.
  • Enhancing requirements for communication with audit committees and related parties.

A critical difference between the ASB’s proposed audit standards and those recently issued by the IAASB and PCAOB is that the ASB will not require auditors of nonissuers to communicate “key audit matters” (or “critical audit matters”) in a separate section of the auditor’s report.  However, the ASB will permit such disclosure if required by the terms of the engagement.

The provisional effective date of the three proposals would be no earlier than for audits of financial statements for periods ending on or after June 15, 2019.

The comment period ends on May 15, 2018.


Jennifer Louis has over 25 years of experience in designing and instructing high-quality training programs in a wide variety of technical and “soft-skills” topics needed for professional and organization success. In 2003, she founded Emergent Solutions Group, LLC, where she focuses her energy on designing and delivering practical and engaging accounting and auditing training. Jennifer started her career in Audit for Deloitte & Touche LLP. Jennifer graduated summa cum laude from Marymount University with a B.B.A. in Accounting.

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