On May 2, 2012, the Center for Audit Quality (CAQ) has released a report summarizing its recent workshop on the evolving role of the public company auditor.
More than thirty workshop participants gathered in New York on March 12 to consider how the public company auditor's role might change to meet the needs of investors. Over half of the workshop participants were investors and buy-side analysts; the remaining participants were a mix of audit committee members, preparers, auditors, and others.
The workshop was built on discussions in a series of CAQ roundtables held with a range of stakeholders over the course of 2011 that began a dialogue about the evolving role of the public company. Workshop participants explored key questions that had been flagged at the roundtables, including the benefits of auditor involvement with financial information disclosed by management outside of the audited financial statements; specifically, Management Discussion and Analysis (MD&A), earnings releases, and key performance indicators (KPI).
Workshop observations included:
Non-GAAP disclosures are important to investors' decision-making processes, although audited financial statements provide a baseline.
More consistency and comparability is warranted in the use of KPI in MD&A and earnings releases.
Investors want to hear directly from management; auditor involvement with information outside the financial statements could add an unwanted "filter."
Some investors would like to see a requirement that the auditor read and discuss the earnings release with the audit committee.
"We hope to advance further consideration of these issues by all interested parties through publication of this workshop summary and through continued dialogue with stakeholders and policy makers", said CAQ Executive Director Cindy Fornelli. "It is vitally important that investors understand and continue to trust the work that auditors perform – and have confidence in our financial reporting system and the checks and balances that underlie the system."