A US Centre for Audit Quality (CAQ) study
found investors believe financial statements are too compliance
focused rather than effectively communicating the company’s
financial results.
Additionally the CAQ report on the evolving
role of the public company auditor found auditor involvement with
information outside the financial statements could add an unwanted
“filter” and investors prefer to hear directly from management.
The report was based on workshops held in New
York in March aimed at exploring the benefits of auditor
involvement with financial information outside financial
statements.
The CAQ also observed that:
- audited financial statements provide the baseline for
investors’ decision making, but non-GAAP disclosure are also
considered important. - more consistency and comparability is warranted in the use of
KPIs in management’s discussion and analysis and earnings releases;
and - some investors would like to see a requirement that the auditor
read and discuss the earnings release with the audit
committee.
The workshop hosted more than thirty
participants, half of whom were investors and buy-side analysts;
the remainder was a mix of audit committee members, preparers and
auditors.
“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,” CAQ executive
director Cindy Fornelli said.
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