US oversight body proposals to change the
auditor’s reporting model have been backed by experts among
investors, preparers and audit firms.
Participants at the Public Company Accounting
Oversight Board (PCAOB) roundtable all agreed on the need to change
the auditor’s reporting model but their views differed on how to
enhance the relevance of auditors’ communications with
One idea the PCAOB proposed is for auditor
discussion and analysis (AD&As) to be included in the auditor
report, which would provide the auditor with the ability to discuss
in a narrative format views regarding significant matters.
“The benefits of AD&As are many. They
would provide investors valued information from an independent
expert that is relevant for investors analysing and pricing risks
and making an investment and voting decisions,” Council of
Institutional Investors executive director Ann Yerger said in
support of the proposal.
Yerger thinks the additional information
should come from “the audit firms and not management or audit
committees as audit firms are objective, third-party experts that
have unique insights into companies”.
Deloitte US’s deputy chief executive Bob
Kueppers argued that management should remain the provider of
information and the auditor should be the provider of assurance on
“Changes should enhance or at least in no way
diminish present-day audit quality, and I think changes should
serve to narrow or at least not widen the expectation gap,”
He also stressed that with the current
reporting deadlines it is “extremely” hard to “get it all done,
wrapped up, get our papers ready for inspection, everything that
has to be done, all within a very compressed timeframe”.
Xerox Corporation vice president and chief
accounting officer Gary Kabureck agreed that instead of increasing
auditor disclosures, management disclosures should expand.
“AD&A is not going to be free or
even cheap. On the contrary, when dealing with external report
drafting of this type, this tends to be very expensive time,”
The other proposals discussed at the
- the required and expanded use of
- auditor assurance on other information
outside the financial statements; and,
- clarification of language in the standard
PCAOB chairman James Doty concluded the debate
by stating that the board’s proposals are not intended to put the
auditor in the position of creating and reporting financial
information for management.
“As the concept release states, the
alternatives are not mutually exclusive. A revised auditor’s report
could include one or a combination of these alternatives or
elements of these alternatives”.