FRC aids credible audit report

The Financial Reporting Council of Nigeria has introduced ‘Rule 9’ to guide Independent auditors on the application of International Standard on Auditing 701 in preparation of audit report.
The innovation was part of its mandate to promote and ensure that financial statements prepared in the country conform to international standards.
The scope of this Rule 9, which hinges on the application of ISA 701, according to FRC, deals with the auditor’s responsibility to communicate key audit matters in the auditor’s report is intended to address both the auditor’s judgment as to what to communicate in the auditor’s report and the form and content of such communication.
Executive Secretary, FRC, Mr. Jim Obazee, expslained that “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 him, the purpose of communicating key audit matters is to enhance the communicative value of the auditor’s report by providing greater transparency about the audit that was performed.
“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 judgment, were of most significance in the audit of the financial statements.
“Communicating KAM can also assist “intended users” in understanding the entity and areas of significant management judgment in the audited financial statements,” he said.
He maintained that Independent Auditors shall comply with provisions of ISA 701 for audits of financial statements and which shall take effect on Decembers 15, 2016.
He also stated that auditors of listed companies are expected to apply this Rule for audit of financial statements for periods ending on or after December 15, 2016, while auditors of all other entities shall apply this Rule for audit of financial statements for periods ending on or after June 30, 2017.
He noted that KAM is not required to be communicated as stipulated by this Rule where law or regulation precludes public disclosure about the matter or in extremely rare instances where the auditor determines that the adverse consequences of the disclosure would reasonably be expected to outweigh public interest benefit of the communication.