• Register
Return to: Home > News > Standards > PCAOB to overhaul auditor’s reporting model

PCAOB to overhaul auditor’s reporting model

The US Public Company Account Oversight Board (PCAOB) has proposed significant changes to auditor's reporting model for US public companies, in what PCAOB chairman James Doty called a "watershed moment."

The major change in the proposed standard will require auditors to identify the "critical audit matters," describe what led the auditor to deem the matter critical and refer to the relevant financial statement accounts and disclosures that relate to the critical audit matter.

'Critical audit matters' are matters addressed during the audit that involved the most difficult, subjective, or complex auditor judgements, posed the most difficulty for the audit to obtain sufficient evidence of or posed the most difficultly to the auditor in forming the opinion on financial statements.

The PCAOB says that it hopes the change will make the auditor's report more informative, and therefore more relevant and useful to investors.

The new standards will also require a statement regarding the auditor's independence to be added to be added to the auditor's report, as well as the year the auditor began serving as the company's auditor and other information.

It also changes certain standardised language in the auditor's report, including the addition of the phrase "whether due to error or fraud."

The second proposed standard, "The Auditor's Responsibilities Regarding Other Information in Certain Documents Containing Audited Financial Statements and the Related Auditor's Report", will replace AU section 550, Other Information in Documents Containing Audited Financial Statements.

This change will apply the auditor's responsibility for 'other information' in a company's annual report filed with the Securities and Exchange Commission (SEC), which also contains the company's audited financial statements and the related auditor's report.

The PCAOB said this will enhance the auditor's responsibility with respect to other information by adding procedures for the auditor to perform in evaluating the other information based on relevant audit evidence obtained and conclusions reached during the audit.

It will also require the auditor to evaluate the other information for a material misstatement of fact as well as for a material inconsistency with amounts or information, or the manner of their presentation, in the audited financial statements.

The PCAOB unanimously approved exposing the proposal for public comment, though not without reservations.
PCAOB member Steven Harris, for example, expressed concern that the proposals are not strong enough to meet the needs of investors, but still supported the publication of the proposed standards.

The proposal is open for comment until 11 December 2013, and is due to come into effect, subject to the US Securities Exchange Commission (SEC) approval, 15 December 2015

Related Link

The Public Company Account Oversight Board

Top Content

    Addressing tax challenges and the digitisation of the economy

    As the economy becomes even more globalised through digital sources, the tax systems currently in place need to be scrutinised to examine whether they are still fit for current and emerging business models. Joe Pickard reports on the OECD’s approach to this issue.

    read more

    Primary financial statements: a game changer in reporting?

    International Accounting Standards Board chair Hans Hoogervorst delivered a speech at the Seminario International sobre NIIF y NIF, organised by the Consejo Mexicano de Normas de Información Financiera in Mexico. The Accountant presents the highlights.

    read more

    FASB readies standards for the netflix generation

    The US Financial Accounting Standards Board (FASB) has updated its accounting standard for entertainment, with a specific eye on keeping up to date with how episodic content, such as television programmes, is consumed in the modern world. Jonathan Minter reports.

    read more

    Brexit: why it takes two to tango

    Former TA editor Vincent Huck, now editor of Insurance Asset Risk, looks at why Brexit might unleash geopolitical intrigue in Europe’s accounting standard-setting scene – and why IFRS 17 will be an incredible source of opportunity for firms in the coming years.

    read more
Privacy Policy

We have updated our privacy policy. In the latest update it explains what cookies are and how we use them on our site. To learn more about cookies and their benefits, please view our privacy policy. Please be aware that parts of this site will not function correctly if you disable cookies. By continuing to use this site, you consent to our use of cookies in accordance with our privacy policy unless you have disabled them.