PCAOB Discussed Changes to the Auditor's Reporting Model in Preparation for Concept Release
The Public Company Accounting Oversight Board today heard a presentation from the PCAOB Office of the Chief Auditor (OCA) on its outreach to investors and others about potential changes to the auditor's reporting model.
"We heard from investors that they want more information in the auditor's report. Investor dissatisfaction with the current auditor's reporting model should concern other constituents as well, including preparers, auditors and regulators," said PCAOB Chairman James R. Doty. "Today's report from our own staff, based on their discussions with a broad audience, will be vital to the Board's effort to develop a meaningful proposal for change in a concept release. Our intention is to expose such a release as early as this summer."
Over the past several months, OCA staff reached out to investors, auditors, preparers of financial statements, audit committee members, and other interested parties to seek their views on potential changes to the auditor's report.
The Board opened today's staff briefing to the public in order to provide additional transparency into the PCAOB standard-setting process. The Board is committed to continue to explore other ways to expand its transparency in the future.
"The auditor's reporting model is a top standard-setting priority of the Board. To better inform their investment decisions, investors say they need to hear more from the auditor about the risks the auditors faced in the audit and about the judgments and estimates management used in the financial statements," said Martin F. Baumann, Chief Auditor and Director of Professional Standards.
At the last PCAOB Standing Advisory Group meeting in October 2010, OCA staff discussed its standard-setting initiative on the auditor's reporting model, and outlined plans to conduct outreach to identify additional investor and user needs to present to the Board. These outreach efforts were consistent with the recommendations of the 2008 U.S. Treasury Advisory Committee on the Auditing Profession.
Last week, the PCAOB Investor Advisory Group also presented recommendations to the Board on changes to the auditor's report. Additionally, the Standing Advisory Group will discuss the auditor's report later this week.
The auditor's report is the primary means by which the auditor communicates to investors and other users of audited financial statements regarding its opinion on those statements.