Audit matters are key

Non-accountants might consider it logical that audit reports in the UK are seven times longer, than those in USA or Europe, sometimes even longer. [1] After all, auditors in the UK certify that financial statements are TRUE and fair whereas they only need to certify they are FAIR elsewhere, or to be more precise fairly stated.

In addition to an opinion, a UK audit report needs to include a basis for their opinion, the auditor’s audit scope, their choice of materiality, a comment on going concern, an opinion on the directors’ remuneration, and governance. They even have to make a comment on whether other information’ in the report is materially inconsistent with the financial statements. None of this is included in the auditors’ reports in the USA or Europe. 

The only other common factor, apart from the opinion, is a list of Key Audit Matters. But even here, UK auditors decide to include many more than one or two key audit matters stated in American or European audit reports. Auditors for US companies recognised a MAXIMUM of three key audit matters. Auditors for UK companies identified a MINIMUM of five. [1]

BUT all these audit reports have nothing to do with the difference between true and fair and fairly stated. Neither are British auditors more zealous or pernickety than their counterparts elsewhere.  No. They merely follow the regulations in the Companies Acts, and auditors excel in following regulations.

This however evokes the question: Why do British auditors report so many key audit matters?

We will never know, because they are not required to tell us. It is however clear that with no regulations a number of key audit matters just disappears.

[1] I studied the 2021 and 2022 annual reports of eight pharmaceutical companies, four based in USA – Abbott Laboratories, Abbvie Inc, Bristol-Myers Squibb Company, Johnson and Johnson, and four based in the Europe – AstraZenica, GlaxoSmithKline, Sanofi, Novartis.