New standard "a revolution" in public co auditing

• Published date: 19 January 2023
• Publication title: Globes (Rishon LeZion, Israel)

Under a new auditing standard, they will come under the spotlight. Starting from financial statements for periods ending on December 31, 2022, public company auditors will have to apply standard 701, which requires them to communicate "key matters in the audit" in the auditor's report

The new standard, which was published in February 2022, appears especially dramatic in the light of recent affairs in which defects were discovered in company financial statements, among them the embezzlement of tens of millions of shekels in Gibui Holdings, and the Unetcredit affair, in which company managers are suspected of stealing millions of shekels, forgery, money laundering, and other offences.

"Up to now, auditors would express an opinion on financial statements in uniform wording, The new standard means that in addition to the usual formula, an opinion must be recorded pointing out all the most significant matters that the auditor has encountered," explains Hofit Gotesdyner, a partner at accountants and consultants BDO Ziv Haft. "The additional new reporting will have a considerable effect on the companies being audited and on the way audits are conducted," she says.

What should go into the special report?

But how are "key matters" to be defined? Gotesdyner explains that for the time being the definition is flexible and is at the auditor's discretion. Key matters, she says, are "all matters arising from the audit that were communicated, or should have been communicated, to bodies that supervise corporate governance (the Israel Securities Authority and other bodies that supervise public companies), according to the professional judgment of the auditor. Very significant matters in the audit of the financial statements for a given period will include, among other things, anything related, or that could be related, to items or material disclosures in the financial statements; and matters on which the exercise of the auditor's judgment was especially challenging, subjective, or complex."

Comment on such significant matters has to be set out in a...