The US Public Company Accounting Oversight
Board (PCAOB) has proposed several changes to auditor’s reports, in
its concept release on the auditor’s reporting model that aims to
increase investor protection as a result of the financial

The PCAOB said that the objective is to
discuss several alternatives for changing the auditor’s reporting
model that could increase its transparency and relevance to
financial statement users, while not compromising audit

Some of the proposed alternatives to auditor’s
reports are:

  • A supplement to the auditor’s report in which
    the auditor would be required to provide additional information
    about the audit and the company’s financial statements,
  • Required and expanded use of emphasis
    paragraphs in the auditor’s report,
  • Auditor reporting on information outside the
    financial statements, and,
  • Clarification of certain language in the
    auditor’s report.

The PCAOB said the alternatives are not
mutually exclusive and that a revised auditor’s report could
include one or a combination of these alternatives or elements of
these alternatives.

“The concept release we issue today represents
a significant step for investor protection in response to the
financial crisis, and a first step toward a holistic consideration
of reforms designed to foster the relevance, transparency and
reliability of the audit process,” PCAOB chairman James Doty

PCAOB chief auditor and director of
professional standards Martin Baumann said the auditor is in a
unique position to provide relevant and useful information, because
of the auditor’s extensive knowledge of the company and as an
independent third-party.

“The concept release explores ways to expand
the auditor’s communication in the auditor’s report about the audit
and the company’s financial statements,” he added.

Earlier this year the PCAOB 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 staff reported its findings to the PCAOB
board in March.

The concept release is open for comment until
30 September 2011.

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