The Public Company Accounting Oversight Board is planning a roundtable discussion for mid-September to get feedback on its ideas to potentially overhaul the current auditor's report.
The board published a concept release in mid-June exploring a number of ideas for how regulators could compel auditors to give investors more information about what they see and do in the normal course of an audit. The board is accepting comments on the concept release through Sept. 30, but also scheduled the roundtable as a way to gain more input. Through the roundtable, the board is hoping to hear from a wide variety of capital market players – investors, analysts, preparers, auditors, audit committee members, and anyone else who has a stake in the contents of a standard auditor's report.
The PCAOB has faced demands from vocal investors who say the current auditor reporting model has done little to forewarn investors about financial trouble, even when companies have collapsed soon after auditors have published clean audit opinions. The PCAOB's Investor Advisory Group told the board in an open session in March that investors want more information from auditors about risk and what auditors have done to respond to risk, about materiality levels and factors, and about the nature and extent of involvement by other audit firms. The group said the majority of investors also want the auditor to discuss significant estimates and judgments made by management and how auditors assessed those.
Through its concept release, the board ponders a number of possible changes to the current reporting model and invites stakeholders to suggest others. The release explores, for example, whether auditors should be required to provide a narrative disclosure, something like an auditor's discussion and analysis, to explain their audit work and their findings. Auditors might also be required to make more regular use of a currently available but little used tool called an emphasis paragraph, where auditors could simply highlight what they regard to be important areas of the financial statements.
The release also explores whether investors would find it helpful if auditors were to provide opinions on information outside the financial statements, such as management discussion and analysis, earnings release, or others. Finally, the release asks whether investors needs could be met simply by providing more clarification of the language currently contained in the standard auditor's report. That might explain, for example, that the audit is not meant to serve as a guarantee against fraud or misstatements.
The Sept. 15 roundtable will be open to the public and accessible via webcast.