Annual reports help investors decide where to put their hard-earned money. More insightful disclosures can therefore improve corporate transparency and enhance investors’ decision-making. This in turn boosts the trust and confidence of investors and other stakeholders in capital markets.
In 2015, in response to strong calls by investors and other users of financial statements, the International Auditing and Assurance Standards Board issued the new and revised auditor reporting standards. Under these standards, the enhanced auditor’s reports (EARs) will contain more information, particularly in the form of key audit matters. These additional disclosures help investors focus on the critical areas in the financial statements which in turn, lead to more meaningful engagements with auditors, directors and management. In Singapore, the equivalent standards took effect for the audits of financial statements for the year ended on or after 15 December 2016. This study therefore analyses the EARs issued by the auditors for the first time. To gauge the usefulness of the EARs, the study also gathers the views of audit committees and investors through online surveys and focus group discussions.
Befitting the EAR’s wide-ranging impact, this study is conducted by several parties, namely Accounting and Corporate Regulatory Authority (ACRA), Association of Chartered Certified Accountants (ACCA), Institute of Singapore Chartered Accountants (ISCA) and Nanyang Technological University (NTU).