Change Nonprofessional Investors Decision †Myassignmenthelp.Com

Question: Discuss About The Change Nonprofessional Investors Decision? Answer: Introducation The IAASB has made the new reporting requirements with effect from the financial year ending 30th of June 2016 and the US PCAOB has declared that they will made their changes effective which will align with the IAASB. It depicts that they are in alignment with the effective dates from the beginning so that more and more information can be provided to the stakeholders of the company. Following are the changes made to the audit report: Applicability The US PCAOB has mentioned that the new reporting requirements will be made applicable only to the public companies which are listed in the recognised stock exchange and on the other hand the IAASB has mentioned that it is required for all types of entities whether it is listed on the recognized stock exchange or not (Giles, Venuti and Jones, 2014). An exception has been given where the key audit matters are required to be disclosed along with the engagement partner only in case of the listed entities (EY, 2014). Type of Matters Each reporting requirements have prescribed different reporting requirements under the new regime. In the case of US PCAOB, the matters have been named as Critical audit matters (Carmichael, 2014). These are defined as the areas where the auditor will have to do the very tedious and difficult task, have to be very subjective and at the last will have to do more complex and detailed judgments. In other words the areas which are very difficult for the auditor to conduct the audit and give their opinion on those areas. On the other hand the reporting requirements as mentioned in the IAASB have been mentioned as Key audit matters. The key audit matters are the matters which are related to the persons who are charged with the governance and it on an urgent basis requires the attention of the auditor and the management also. Therefore, the auditor is required to communicate the key audit matters in his independent auditors report. Tenure of the Auditor Under the US PCAOB, the tenure of the auditor is required to be mentioned as to after how many years the other auditor is required to be appointed whereas under the IAASB the period of the engagement of the auditor is not required to be addressed. Going Concern - Under the US PCAOB, the going concern is required to be mentioned separately in the separate part whereas under the IAASB the going concern is required to be disclosed only when there are indications that the going concern assumption can be affected and the related accounting policies were mentioned (AICPA, 2014). In this way, there have been the key changes which will help the investors of the market globally. Explain the reasons/motivation for the changes and critique whether these changes are likely to achieve their aims. In the earlier years the auditors have been providing their opinion of the financial statements of the company on the ad hoc basis by stating that the financial statements represents the true and fair view of the financial position and the financial performance of the company and by mentioning that the company has either followed the provisions of the accounting standards or violated the provisions of the accounting standards. While this approach is valuable in the earlier time but it has become valueless in the current scenario (Sylph, 2016). The shareholders, investors, financial institutions and other stakeholders want to have more and more insights of the companys details regarding its operations, its functioning, its performance and other related matters. With these challenges being faced by the stakeholders and society of the company, the regulatory authorities and the standard setting bodies have reacted with the new regimes under which the auditors will be required to say mor e (IASB, 2016). Yes, the changes will in all the ways made it possible to meet the challenges and thereby achieving the objectives of the company. The changes have been made with the addition of the communication of the key audit matters to management of the company in the independent auditors report. The same has been introduced by the International Auditing and Assurance Standard board with the introduction of the new Auditing Standard 701 (Christensen, 2014). On the other hand the public company accounting oversight board has introduced the auditing with the critical matters rather than the key matters. They both have provided the different meaning to the independent auditors report and somehow the stakeholders of the company including the shareholders want to have both the additional requirements of the consensus basis. It has been observed that the major issue has been of the alignment only so as to provide the global usage of the independents report but with this also the new change has seen t he sudden enhancement in the auditors report and now it is more informative and useful (Simnett and Huggins,2014). Outline the likely impact of the audit reporting on audit practice. The stakeholders will have the more and more information about the company like about its operations, functions and the results of the company. The discrepancy in accounting policy if any observed by the auditor and reported accordingly will help the investor to understand whether it will bring the deterioration of the business by having the liquidity problem, etc. For instance in the case of the ABC Learning centre, the company has been revaluating their intangibles over the years and they have made the same to the extent which have made the value of the intangibles equivalent to eighty percent of the total assets and the auditor has not reported the same fact in his auditor report. Due to which the company has gone for liquidation and had received the class suit for low value of the wealth of the shareholders. Therefore, by having the key changes in the auditors report, there will be positive impact across the globe. References AICPA, (2014), Substantive differences between the International Standards on Auditing and Generally Accepted Auditing Standards available at https://www.aicpa.org/interestareas/frc/auditattest/downloadabledocuments/clarity/substantive_differences_isa_gass.pdf accessed on 16/09/2017. Carmichael, D.R., (2014). The PCAOB and the social responsibility of the independent auditor.Accounting Horizons,18(2), pp.127-133. Christensen, B.E, (2014). Do critical audit matter paragraphs in the audit report change nonprofessional investors' decision to invest?.Auditing: A Journal of Practice Theory,33(4), pp.71-93. EY, (2014), Enhancing the Auditors Report, available at https://www.ey.com/Publication/vwLUAssets/EY-overview-enhancing-the-auditors-report/$FILE/EY-overview-enhancing-the-auditors-report.pdf accessed on 16/09/2017. Giles, J.P., Venuti, E.K. and Jones, R.C., (2014). The PCAOB and convergence of the global auditing and accounting profession.The CPA Journal,74(9), p.36. IASB, (2016), IAASB publishes comparison with the PCAOB auditor reporting proposal available at https://www.iasplus.com/en-us/news/2016/05/iaasb-pcaob-compare-report accessed on 16/09/20017. Simnett, R. and Huggins, A., (2014). Enhancing the auditor's report: to what extent is there support for the IAASB's proposed changes?.Accounting Horizons,28(4), pp.719-747. Sylph J, (2016), The New Auditors Report : A Comparison between the ISAs and the US PCAOB Re proposal available at https://www.shinnihon.or.jp/shinnihon-library/publications/issue/us/gaap-weekly-update/pdf/GAAP-2016-06-14-01.pdf accessed on 16/09/2017.