Chicago, April 10, 2014 – Joan Waggoner, CPA, Plante Moran Partner, Professional Standards, served as a panelist at the Public Company Accounting Oversight Board’s public meeting in Washington on April 2 regarding the Auditor’s Reporting Model Proposal.
The Board’s August 2013 proposal includes a new auditing standard that is intended to increase the informational value of the auditor’s report to promote the usefulness and relevance of the audit and the related auditor’s report. The proposed new standard would require the inclusion of “critical auditing matters” from the auditor’s perspective in the audit report, a significant change from the traditional pass/fail reporting model.
The proposal also includes a second auditing standard to enhance the auditor’s responsibilities for other information in an annual report that contains audited financial statements and the auditor’s report.
Waggoner said this project is one of the most difficult that the board has undertaken since its inception, given all of the diverging points of view and interests that are involved. “From reviewing the comment letters of the smaller accounting firms, I find there is a reluctance to totally embrace the inclusion of critical audit matters in the auditor’s report,” she said. “From discussing the issue with my partners, we also have some worries about certain aspects of CAMs, although we are supportive of the Board’s objective to make the auditor’s report more meaningful to investors.”
Waggoner questions if these changes should apply to all publicly traded companies, as she expects the costs to be disproportionately higher for smaller companies, with some added pressure when close to filing deadlines.
“A company accepts a high level of responsibility and accountability when it enters the public marketplace,” she said. When evaluating a change to the auditor’s report, she feels it is necessary to consider whether the proposed change would actually protect investors or just provide additional information to investors. If the change is only to provide additional information to investors, then the relevance of the information to investors needs to be firmly established and the cost/benefit analyzed before making the proposed standard applicable to all publicly traded companies, large and small.
She said she understands the Center for Audit Quality has initiated a field test of the proposed auditor’s reporting model and is very interested in reviewing the results of that testing once it is completed.
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