Speaking at the Economic Club of Detroit on March 17, PricewaterhouseCoopers Chairman Dennis Nally called for the auditing profession to expand its role to include greater responsibility for more of the contents of a company’s annual report.

Audit reports "should cover the Management Discussion & Analysis, the proxy and other nonfinancial operating data," according to Mr. Nally.

Mr. Nally indicates that the current standard – providing "reasonable assurance" that the financial statements are free of "material misstatement" - needs to be expanded in order to restore investor confidence in the content of the company’s annual reports.

"As a profession, we should work with company management and the audit committee to ... consider incorporating into the audit report disclosures that are critical to helping investors understand the company's business."

Mr. Nally continued, "Our audit report would extend to cover information in the MD&A relating to the impact of, say, exited businesses on the company's sales, on its margins, on its overall reported profits and, ultimately, on its cash flow."