DECEMBER 31. For normal people, it is the day to turn a new leaf in their life and leave behind the good and bad memories of the previous year so they can look forward to a great year ahead. For the people preparing the Company’s financial statements whose fiscal year ends on December 31, it is the most dreadful day of their life. On the other side of the spectrum, for the ones who will be reviewing and auditing the Company’s financial statements, it marks the start of a busy season. In short, the accountants and the auditors become immortal starting December 31.
So what’s new? Isn’t that an annual thing? The accountants and the auditors should have been used to this already. Yes, it could be routinary to some but every year, it seems that there is something new that would throw off the rhythm of these ruffled auditors and accountants. Apart from the annual updates to the accounting standards which could have a material impact on the financial statements, December 31, 2016, promised to be the most memorable day in the life to these accountants and auditors.
For the accountants, who already endured a total of 60 hours just to comply with the Continuing Professional Development (CPD) units for accreditation purposes with the Board of Accountancy (BOA), it is the time that they are put in the spotlight, along with the company management. A compilation certificate should be attached to the financial statements of the Company, duly signed by the Certified Public Accountant (CPA) employed by the Company provided that the annual gross sales/receipts/revenues are over P10,000,000.
These CPAs in commerce and industry must also comply with the BOA Resolution that they should submit the financial statements to the Company’s external auditors not later than two months after the end of the accounting period; so in the case of the financial statements for the year ending December 31, 2016, the deadline would be on February 28, 2017. The good side of all these changes for the CPAs in commerce and industry is that they would be able to ascertain financial reporting updates without having to rely on their external auditors. At the end of the day, the preparation of the financial statements of the Company always rests with the management, with the help of its most trusted CPAs in the organization and not their contracted external auditors.
For the auditors, a new and enhanced report is expected for this year. Among the notable changes include the arrangement of the various sections of the auditors’ report wherein the Opinion would now be presented first, followed by the Basis for Opinion section. Also, there will be a new section to communicate Key Audit Matters (KAM) in the auditors’ report for financial statement audits of listed entities. There will also be an enhanced auditor reporting to going concern including the description of the respective responsibilities of management and the auditor for this going concern. If and when a material uncertainty exists, a separate section is presented under the heading, “Material Uncertainty Related to Going Concern.”
In addition, the auditors’ report will also include an affirmative statement about the auditor’s independence and fulfillment of relevant ethical responsibilities, an enhanced description of the auditor’s responsibilities and key features of an audit and the new and revised reporting requirements relating to other information that are included in the Company’s annual report.
With these changes in the auditor’s report, the communicative value to users is boosted even as the interaction between the auditor and the user is stimulated and made more robust. The user would also now fully understand what the audit is and what is the role of auditors in it.
After all, the overall objective of the auditors is to enhance the degree of confidence of the intended users to the financial statements.
So, to the accountants and the auditors, may the odds be in your favor.
Mark Solatorio is manager of the Audit & Assurance Division, P&A Grant Thornton Cebu.
As published in Mindanao Times, dated 26 January 2017