Transparency has always been key for investors, so in 2013 when the extended audit report was introduced, it was warmly welcomed. The practice promotes reliability, transparency, and willingness to share perspectives, and it was therefore quickly embraced. Some companies even adopted the extended auditor report before its implementation date. Now, businesses around the world are starting to make use of it.
In the UK, the extended audit report has come a long way. It has revolutionised auditor communications, and even generated its own awards ceremony! But the progress achieved in introducing the extended audit report remains fragile. We want to avoid going back to boilerplate reports, and instead keep them insightful and dynamic. This will need the continued support of everyone involved.
Our new publication, The Extended Audit Report: The start of a conversation outlines some of the challenges, along with some calls to action. Every company and every audit is different, so each audit report should be different. Building on the UK experience so far, our publication aims to be a useful guide internationally, and encourage interesting and relevant audit reports.
Participation from everyone is key
Firstly, we would like auditors to be courageous. Auditors should implement the spirit of extended audit reporting: transparency in the public interest. Regulators can also help by sharing best practice rather than highlighting bad practice. This is important in the initial stages when everyone is learning.
We also encourage investors to use the extended audit report. They can be involved in the process by asking for the information they want and raise questions at AGMs. Everyone should be working together to promote best practice in audit, from professional bodies helping to train practitioners and businesses, to academics who can use the rich data to shine a light on audit quality.
All of this raises challenges for the profession. I hope our new publication will inspire everyone to work together to promote best practice in audit. There is a risk of failure, but the result is worth working for: increasing the value and relevance of auditing.