The Future of the Auditor’s Report

What the auditor’s report looks like today

The current auditor’s report structure dates from the 2016 auditor reporting standards (ISA 700, Revised, ISA 701, ISA 720, Revised). That suite introduced the KAM section for listed entities, moved the opinion paragraph to the top of the report, and added the material uncertainty related to going concern section. Before 2016, the auditor’s report was largely a pass/fail document. After 2016, it became an information document for listed entity audits.

For non-listed entities, the report changed less. The opinion moved to the top. A going concern section appeared when material uncertainty existed. But without KAMs, the report remained short. Most non-listed auditor’s reports in the Netherlands run two to four pages.

The December 2026 effective date changes the report for both categories of entity, though listed entities face the larger expansion.

ISA 570 (Revised 2024): two new going concern conclusions

ISA 570 (Revised 2024) requires the auditor to include two explicit conclusions in every auditor’s report, regardless of whether any going concern issue was identified. The auditor must state a conclusion on whether management’s use of the going concern basis of accounting is appropriate. The auditor must also state a separate conclusion on whether a material uncertainty related to going concern exists.

Under the current standard, the going concern section of the auditor’s report only appeared when a material uncertainty was identified and disclosed, or when the auditor needed to modify the opinion because a material uncertainty was not adequately disclosed. If no material uncertainty existed, the report contained only the standard language in the auditor’s responsibilities section about evaluating management’s use of the going concern basis. No separate, explicit conclusion was stated.

ISA 570 (Revised 2024) changes that for every audit. The IAASB published illustrative report language alongside the standard in April 2025. The illustrative going concern section for an unlisted entity where no material uncertainty exists reads as a short section with the two explicit conclusions, accompanied by context stating that these conclusions are not an opinion on a discrete matter and are not a guarantee of the entity’s ability to continue as a going concern.

For your report template, this means adding a going concern section that was previously absent from clean (no material uncertainty) audit reports. The section is mandatory from 2027 year-end audits onward, regardless of client size.

The IAASB’s FAQ document on ISA 570 (Revised 2024) reporting (published May 2025) confirms that the going concern section sits after the Basis for Opinion section, and ISA 700 (Revised) allows flexibility on its placement relative to other sections. But the IAASB recommends placing it before the KAM section to give going concern matters appropriate prominence.

The close call scenario

The close call scenario is new to the formal standards. Under the current ISA 570 (Revised), when management concluded that no material uncertainty existed and the auditor agreed, the auditor could choose to report a KAM under ISA 701 if the matter was of most significance. In practice, this was inconsistent. Some auditors reported close calls as KAMs. Others did not. There was no requirement either way.

ISA 570 (Revised 2024) formalises the treatment. For audits of listed entities (changing to “publicly traded entities” from December 2026 under the narrow-scope amendments), when management has made significant judgements in concluding that no material uncertainty exists, the auditor must report on those judgements. The standard classifies a going concern close call as a KAM by its nature. But instead of reporting it in the KAM section, it goes in the going concern section of the report. The KAM section then includes an introductory paragraph referencing the going concern section and noting that the matter is also a KAM.

This matters for report structure. Your template for listed entity (or PTE) audits needs a variant that handles the close call: a going concern section with the description of how the auditor evaluated management’s significant judgements, plus a modified KAM section introduction. The IAASB published illustrative language for this scenario in the appendix to ISA 570 (Revised 2024).

For non-listed entities where ISA 701 does not apply, the close call treatment is simpler. The going concern section includes the two explicit conclusions. If the auditor wants to draw attention to the fact that management’s judgement was particularly significant, ISA 570 (Revised 2024) permits (but does not require) voluntary additional disclosure in the going concern section. Most mid-tier firms will default to the shorter version for non-listed clients.

ISA 240 (Revised): fraud in the auditor’s report

ISA 240 (Revised) introduces new requirements for communicating fraud-related matters in the auditor’s report. The changes primarily affect audits where ISA 701 applies (publicly traded entities from December 2026).

The revised standard requires the auditor to determine which fraud-related matters required significant attention during the audit. Of those matters, the auditor must identify which were of most significance in the audit of the current period and therefore are KAMs. This is a new requirement. The previous ISA 240 did not specifically address fraud in the context of KAM identification.

In practice, this means the engagement team must document a specific evaluation of whether any fraud-related matter qualifies as a KAM. That evaluation needs to happen before the auditor’s report is finalised, and the conclusion needs to be documented in the ISA 240 fraud risk assessment working paper. If a fraud-related matter is identified as a KAM, the auditor describes it in the KAM section following the requirements of ISA 701.

For non-listed entities, ISA 240 (Revised) doesn’t add KAM-related content to the report (since ISA 701 doesn’t apply). But the inherent limitations paragraph in the auditor’s report has been restructured. Under the revised standard, the description of inherent limitations relating to fraud is separated from the description of the auditor’s responsibilities. The IAASB restructured this because the previous drafting combined them in a way that some users read as the auditor disclaiming responsibility for fraud. The new structure presents the auditor’s responsibilities first, then the inherent limitations separately. Your template wording for the “Auditor’s Responsibilities” section of every report needs to be updated to reflect this restructured language.

The FRC’s proposals: beyond the IAASB baseline

The FRC launched a consultation in late 2025 (closing 16 January 2026) on proposed revisions to the UK auditor reporting standards. These proposals go beyond the IAASB’s ISA 570 and ISA 240 changes. If finalised, they will apply to ISA (UK) audits for periods beginning on or after 15 December 2026.

The FRC proposes expanding the KAM reporting requirement. Currently, only auditors of public interest entities and listed entities must communicate KAMs. The FRC’s proposal extends the requirement to all listed entities and to entities that choose to, or are required by law or regulation, to communicate KAMs. For firms that audit smaller listed entities, this potentially doubles or triples the number of engagements requiring KAM reporting.

The FRC also proposes that where a KAM relates to the entity’s accounting practices, the auditor should report observations about significant qualitative aspects of those practices, including accounting policies and estimates. This is a departure from the current KAM model, which describes the matter and how the auditor addressed it, but does not typically include the auditor’s views on management’s accounting choices. Adding the auditor’s qualitative assessment makes the KAM section closer to an analytical commentary than a procedural description.

For entities following the UK Corporate Governance Code, the FRC proposes that auditors describe the impact of the entity’s controls on the planning and performance of the audit, and consider whether any significant deficiencies in internal control identified during the audit warrant inclusion in the report. This is not an integrated audit (the FRC has been explicit that it isn’t proposing to mandate assurance over internal controls), but it adds a new reporting dimension that many firms will need to develop templates for.

The FRC also proposes reducing boilerplate. The auditor’s responsibilities for reporting by exception (and the related conclusions) would no longer appear in the report unless there is something to report. Those responsibilities would instead be published on the FRC’s website, with a link in the report. This is a sensible decluttering move that reduces the report by roughly half a page for clean audits.

If you audit under ISA (UK) or international ISAs, the FRC’s direction signals where other regulators will likely follow. The NBA in the Netherlands has already adopted amendments requiring additional going concern and fraud reporting in the Dutch auditor’s report. The IAASB itself will monitor the impact of ISA 570 (Revised 2024) and ISA 240 (Revised) through its post-implementation review process.

Worked example: redrafting a report template

Firm: Jansen Audit & Assurance N.V. — Clients: 35 statutory audits (30 non-listed, 5 PIE) | Current report templates: 4 variants (clean, MURGC, modified opinion, listed with KAMs)

Step 1: Identify the template changes

The methodology partner lists every template variant and maps each December 2026 change against it.

Non-listed clean report: add the going concern section with two explicit conclusions (ISA 570, Revised 2024). Restructure the auditor’s responsibilities section to separate fraud inherent limitations (ISA 240, Revised). Replace “listed entity” with “publicly traded entity” in any standard language.

Listed/PIE report with KAMs: all of the above, plus add a template variant for the going concern close call scenario (going concern section with management’s significant judgements, modified KAM section introduction). Add a documentation prompt for the ISA 240 (Revised) KAM evaluation on fraud-related matters.

Step 2: Draft the going concern section wording

Using the IAASB illustrative examples published in April 2025, the methodology partner drafts the going concern section for the non-listed clean report. The draft includes the two explicit conclusions and the accompanying context paragraph. She sends it to the engagement partners for review and asks each to identify one current client where the close call variant would have been needed in the prior year audit. This produces real test cases for the close call template before audit season starts.

Step 3: Restructure the auditor’s responsibilities section

The current template combines the auditor’s fraud responsibilities with the inherent limitations in a single paragraph. ISA 240 (Revised) requires these to be separated. The methodology partner redrafts the section into two distinct components, following the restructured language in ISA 240 (Revised). She also replaces all instances of “listed entity” with “publicly traded entity” across every template.

Step 4: Pilot the revised templates

Before the 2027 audit season, the firm runs the revised templates against two completed 2026 files (one non-listed, one PIE). The pilot checks that the report assembles correctly, that the going concern section integrates with the existing report structure, and that engagement teams can populate the close call variant without ambiguity.

Practical checklist for report template updates

1. Download the IAASB illustrative auditor’s reports from the ISA 570 (Revised 2024) appendix (published April 2025). These include wording for four scenarios: unlisted entity with no material uncertainty, listed entity with no material uncertainty, listed entity with a close call, and material uncertainty exists. Use them as your drafting baseline.
2. Add the two explicit going concern conclusions to every auditor’s report template, including your clean report for non-listed entities. This section was previously absent from clean reports. It is now mandatory under ISA 570 (Revised 2024) for all audits from December 2026.
3. Restructure the auditor’s responsibilities section in every template to separate fraud responsibilities from inherent limitations, following ISA 240 (Revised). The previous combined drafting is no longer appropriate.
4. For PIE and PTE audit templates, add a documentation prompt requiring the engagement team to evaluate whether any fraud-related matter qualifies as a KAM under ISA 240 (Revised). This evaluation must be documented before the report is signed.
5. Replace “listed entity” with “publicly traded entity” in all standard report language, engagement letters, and quality management documentation. The narrow-scope amendments make this change across the ISQMs and ISAs from December 2026.
6. If you audit under ISA (UK), monitor the FRC’s finalisation of the UK auditor reporting standards consultation. If the KAM expansion and internal controls reporting proposals are adopted, you’ll need additional template variants for those requirements.

Common mistakes to watch for

• Using the old ISA 570 (Revised) report template for a 2027 year-end audit. The two explicit going concern conclusions are a new, mandatory element. An auditor’s report that omits them is non-compliant with ISA 570 (Revised 2024) from the first day the standard applies.
• Placing the going concern close call in the KAM section instead of the going concern section. ISA 570 (Revised 2024) is specific: the close call is reported in the going concern section, and the KAM section includes a cross-reference. Putting it in the KAM section directly violates the standard’s reporting requirements.
• Forgetting to update the inherent limitations language in the auditor’s responsibilities section. ISA 240 (Revised) restructures how fraud limitations are presented. The old combined paragraph is no longer consistent with the standard. This is an easy fix, but it requires updating every template variant, including non-listed entity reports.

Related content

Frequently asked questions

Further reading and source references

• ISA 570 (Revised 2024), Going Concern: appendix with illustrative auditor’s reports for four reporting scenarios, published April 2025.
• ISA 240 (Revised), The Auditor’s Responsibilities Relating to Fraud: restructured inherent limitations language and fraud-related KAM requirements.
• ISA 700 (Revised), Forming an Opinion and Reporting on Financial Statements: the base standard for auditor’s report structure.
• ISA 701, Communicating Key Audit Matters in the Independent Auditor’s Report: KAM requirements for listed/PTE entities.
• FRC Consultation on UK Auditor Reporting Standards (late 2025): proposals for expanded KAM reporting, controls commentary, and boilerplate reduction.
• IAASB FAQ on ISA 570 (Revised 2024) Reporting (May 2025): guidance on placement and content of the going concern section.