• Register
Return to: Home > News > Standards > PCAOB to overhaul auditor’s reporting model

PCAOB to overhaul auditor’s reporting model

The US Public Company Account Oversight Board (PCAOB) has proposed significant changes to auditor's reporting model for US public companies, in what PCAOB chairman James Doty called a "watershed moment."

The major change in the proposed standard will require auditors to identify the "critical audit matters," describe what led the auditor to deem the matter critical and refer to the relevant financial statement accounts and disclosures that relate to the critical audit matter.

'Critical audit matters' are matters addressed during the audit that involved the most difficult, subjective, or complex auditor judgements, posed the most difficulty for the audit to obtain sufficient evidence of or posed the most difficultly to the auditor in forming the opinion on financial statements.

The PCAOB says that it hopes the change will make the auditor's report more informative, and therefore more relevant and useful to investors.

The new standards will also require a statement regarding the auditor's independence to be added to be added to the auditor's report, as well as the year the auditor began serving as the company's auditor and other information.

It also changes certain standardised language in the auditor's report, including the addition of the phrase "whether due to error or fraud."

The second proposed standard, "The Auditor's Responsibilities Regarding Other Information in Certain Documents Containing Audited Financial Statements and the Related Auditor's Report", will replace AU section 550, Other Information in Documents Containing Audited Financial Statements.

This change will apply the auditor's responsibility for 'other information' in a company's annual report filed with the Securities and Exchange Commission (SEC), which also contains the company's audited financial statements and the related auditor's report.

The PCAOB said this will enhance the auditor's responsibility with respect to other information by adding procedures for the auditor to perform in evaluating the other information based on relevant audit evidence obtained and conclusions reached during the audit.

It will also require the auditor to evaluate the other information for a material misstatement of fact as well as for a material inconsistency with amounts or information, or the manner of their presentation, in the audited financial statements.

The PCAOB unanimously approved exposing the proposal for public comment, though not without reservations.
PCAOB member Steven Harris, for example, expressed concern that the proposals are not strong enough to meet the needs of investors, but still supported the publication of the proposed standards.

The proposal is open for comment until 11 December 2013, and is due to come into effect, subject to the US Securities Exchange Commission (SEC) approval, 15 December 2015

Related Link

The Public Company Account Oversight Board

Top Content

    Time pressure: Facing up to mental health

    In an ‘always on’ culture, it is becoming increasingly difficult to manage a healthy work-life balance. While companies are beginning to address this problem by introducing different support systems, Joe Pickard finds more could be done to ensure the wellbeing of the professions workforce.

    read more

    Venezuela: the race for the dollar

    With a new currency following hyperinflation, large sections of the population emigrating to neighbouring countries, an economy on the brink of collapse and no apparent solution coming from the government, Jonathan Minter finds a profession struggling to stay afloat in Venezuela.

    read more

    Brazil: transparency and control

    Brazilian accountants have an optimistic view of the impact of more-regular reporting and the implications of audit controversies for the profession. Paul Golden reports.

    read more

    Argentina: looking for a clearer view

    The Argentine accounting profession continues to grapple with the impacts of a weak economy and a culture of financial corruption. Paul Golden takes a closer look.

    read more

    Blockchain: adapting to disruptive tech

    In the relatively few years since digital currencies first began using blockchain technology, the array of potential applications has grown significantly – and continues to expand. Dan Balla, Matthew Schell and Dave Uhryniak from Crowe look at how it impacts accountancy.

    read more
Privacy Policy

We have updated our privacy policy. In the latest update it explains what cookies are and how we use them on our site. To learn more about cookies and their benefits, please view our privacy policy. Please be aware that parts of this site will not function correctly if you disable cookies. By continuing to use this site, you consent to our use of cookies in accordance with our privacy policy unless you have disabled them.