Deloitte said on Tuesday that a number of South African companies had already adopted new auditing standards that would “raise the bar” by improving transparency and clarity.

With the effects of the recent financial crisis still being felt, moves towards an improved standard of clear and transparent auditor reporting were gathering pace globally.

A statement from Deloitte said that while extended auditor’s reports had been in place for some time in the UK and other parts of Europe, their adoption in South Africa was “a momentous occasion” for the auditing profession.

According to the new standards, developed by the International Auditing and Assurance Standards Board and prescribed by the Independent Regulatory Board for Auditors in South Africa, auditors of listed companies would be required to communicate those matters that were of most significance in the audit of the financial statements.

Deloitte said that the amended standards would come into force later next year, but some South African companies were early adopters. The changes are already becoming a reality in SA with Imperial Holdings and Attacq’s annual financial statements having included the enhanced auditor’s reports.

Chairperson of the International Auditing and Assurance Standards Board, Professor Arnold Schilder commended Deloitte for its early adoption, saying that stakeholders would really like the additional information provided in the enhanced reports.

Director of standards at the Independent Regulatory Board for Auditors Imran Vanker said: “The new audit report is a response to investor demands. The report presents audit messages in a manner that will attract the attention of investors.”

Deloitte said the experience in the UK market, where the reports have been issued over the last 12 months, was that these improved the quality of risk reporting and were a valuable tool for stakeholders in improving their understanding of risks faced by the company.

However, in the UK, it was realised that this requirement should not just be about providing a list of a large number of risks.

“We want to see that judgement is applied and companies have been asked to report on the principle risks,” said the chief executive officer of the UK’s Financial Reporting Council, Stephen Haddrill.

“The crucial thing is investors have really valued those extended audit reports as they gave insight into what the auditor was doing and was worried about. It is reassuring to know that someone is dealing with concerns that matter to investors.”

A past chair of the ministerial panel for the review of accountants and auditors in South Africa and a member of the King Committee on Corporate Governance Dr Len Konar said early adoption of the changes would give companies “room to manoeuvre”.

“Companies need to start building on it and getting managers to engage more with auditors. It is good that some companies are already adopting the changes,” he said.

William Touche, an audit partner at Deloitte’s London practice, said additional communication around the role of the auditor would open “the black box” of those opaque issues in statements which should now be explained more effectively.

“This gives auditors an enhanced status and role in the capital markets ecosystem,” he said.

A longer-term viability statement takes into account the risks the board sees and how they will be mitigated over a period of years looking forward.

According to Haddrill, the company chooses the length of that period as it must be specific to the nature of the business. Companies in the UK are mostly looking at a three-year outlook.

“The auditor’s role is beginning to look forward now, as opposed to reflecting on the past with increased perfection. We must tell the story of how a company runs with a factual lens and if not everything is according to plan, the story must say why there are additional things to do,” he said.