Recent changes to international standards for audit reports have improved the quality of information that’s available to investors, and had a positive impact on wider elements of financial reporting, including governance and corporate reporting, according to a new report from the Association of Chartered Certified Accountants.

The ACCA report, Key audit matters: unlocking the secrets of the audit, examines the impact of recent changes to auditor reporting standards from the International Auditing and Assurance Standards Board, which became applicable in many parts of the world starting with December 2016 year-end audits. The report examined 560 audit reports across eleven countries and four continents. In the U.S., the Public Company Accounting Oversight Board also recently began requiring changes in auditor reports, with the approval of the Securities and Exchange Commission.

The most important change in the international standards has been the discussion of “key audit matters,” in response to calls from investors and other stakeholders for more details about the audit process and greater transparency and clarity of the audit report. The international standard requires the auditor to list the areas of the audit that involve the most risk and explain the audit approach to those areas. The PCAOB standard in the U.S. includes a similar requirement for a discussion of “critical audit matters,” although that requirement has not yet taken effect.

There were 1,321 key audit matters reported across a sample of 560 audit reports from Brazil, Cyprus, Kenya, Nigeria, Oman, Romania, South Africa, the UAE and Zimbabwe analyzed by the ACCA. The most common KAM relates to asset impairment, mentioned in more than a quarter of all reports. Revenue recognition, excluding any reference to fraud, is the second most common KAM, followed by doubtful debt, goodwill impairment and considerations relating to tax, including the valuation of deferred tax assets.

Key audit matters

The revised IAASB standards reorder the audit report to prioritize information that is most relevant to users, and improve the disclosure requirements around "going concern" issues.

The report finds that the international standards have led to providing better information to investors, and have also encouraged improvements throughout the financial reporting process.

“In addition to being useful for investors, ACCA’s report has shown widespread benefits resulting from the adoption of key audit matters, including better governance, audit quality and corporate reporting,” said Andrew Gambier, head of audit and assurance at ACCA, in a statement. “As these benefits are significant contributors to better financial reporting more generally, it’s important that audit firms are given encouragement to improve their implementation of the standard, through proportionate and sensible regulation.”

The report also includes some examples of best practices and identifies some areas for potential improvement in the future.

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Michael Cohn

Michael Cohn

Michael Cohn, editor-in-chief of, has been covering business and technology for a variety of publications since 1985.