‘Front end’ of company reports do not meet auditing standards, says regulator
Auditors’ work on non-financial information in company reports does not meet auditing standards, a new report has found.
A report published today by the Financial Reporting Council (FRC) said auditors are often not doing enough to support statements made in the ‘other information’ section of company reports.
The ‘other information’ section, also known as the ‘front end’, has become an increasingly important part of annual reports, as it offers guidance about the company’s future prospects to investors.
The FRC said misstated information in this section can undermine the credibility of the financial statements or mislead investors.
A lack of clear guidance in auditing standards is partly to blame for the poor quality of work, the auditing regulator added.
Mike Suffield, acting executive director at the FRC, said: “Auditors must improve the extent and quality of the work that they perform on the front end of the annual report.
“The FRC will review the requirements on auditors in this area in auditing standards as part of its current project reviewing auditing standards to see what changes are necessary to help improve the work carried out.”
The FRC said auditors should place greater emphasis on reviewing key non-financial information it includes in reports to ensure it is accurate.