A proposal by the Public Company Accounting Oversight Board (PCAOB) to enhance the auditor’s reporting model will be the focus of a public meeting the US regulator will host on April 2 and 3 in Washington, DC.
The meeting is intended to give the PCAOB an opportunity to hear feedback on the proposal from panelists, which are expected to include, among others:
- Investors and investor advocates
- Senior executives and audit committee chairs of major corporations
- Representatives from audit firms
On August 13, 2013, the PCAOB proposed a new auditing standard – The Auditor's Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion – that would retain the pass/fail model in the existing auditor's report, but also provide additional information to investors and other users of financial statements about the audit and the auditor.
“The board issued this proposal in the context of its mission to protect the interests of investors and the public interest in the preparation of informative, accurate, and independent audit reports,” board member Jay Hanson said during a speech at the SEC Institute 29th Annual SEC Reporting and FASB Forum on December 16, 2013. “In the wake of the 2008 financial crisis, involving the failures or near failures of systemically important entities that had received unqualified audit reports just months earlier, investors raised questions about whether more communication by auditors focusing on what they learn during audits could provide investors with important insight into the risks associated with the audit clients.”
According to the PCAOB, the proposed auditing standard would require the following:
- The communication of critical audit matters as determined by the auditor. Critical audit matters include those the auditor addressed during the audit of the financial statements that involved the most difficult, subjective, or complex auditor judgments, as well as those that proved the most difficult to the auditor in obtaining sufficient appropriate evidence and forming an opinion on the financial statements.
- The addition of new elements to the auditor’s report related to auditor independence, auditor tenure, and the auditor’s responsibilities for – and the results of – the auditor’s evaluation of other information outside the financial statements.
- Enhancements to existing language in the auditor’s report related to the auditor’s responsibilities for fraud and notes to the financial statements.
The PCAOB received 237 comment letters from individuals, businesses, industry organizations and associations, and academic institutions about the proposed enhancements to the auditor’s reporting model.
“We received many thoughtful, reasoned comments on the board’s proposal, and this public meeting is intended to further explore the issues,” PCAOB Chairman James Doty said in a written statement yesterday.
The meeting will be held at The Westin Washington DC City Center Hotel, 1400 M St. NW. The time has yet to be announced. The meeting will be open to the public and is also available via webcast on the PCAOB website.