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Preparers oppose US plan for greater auditor disclosure

7th January 2014

MGI World Preparers oppose US plan for greater auditor disclosure

Financial statement preparers appear overwhelmingly opposed to plans in the US to introduce more disclosures in audit reports.

Changes to the auditor’s reporting model for US public companies unveiled by the PCAOB last August would include a requirement for auditors to identify and describe “critical audit matters”.

But preparers of financial statements appear unwilling to see their responsibilities usurped by auditors.

“While some investors may desire improvements in disclosures, the proper source of this information is management and not the auditor,” Fedex  told the PCAOB in a letter on the board’s proposal to expand disclosures in auditors’ reports.

Letters from dozens more companies express similar concerns about the inclusion of descriptions of the most difficult matters auditors encountered during the audit

The PCAOB’s proposal “seeks to supplant management’s responsibility for disclosure of critical accounting matters” with an auditor, the FedEx letter said. It also warned of the plans to “publicise aspects of the audit process that may not be useful to investors”.

Apple, Chevron and Wells Fargo are among the more than 60 US firms opposed to the plans. In addition bodies such as the Committee on Corporate Reporting of Financial Executives International and the US Chamber of Commerce expressed concerns. Letters from investor advocates, however, were supportive of the planned changes.

The proposed auditor reporting standard would also require the addition of new elements to the auditor's report related to auditor independence, auditor tenure, and the auditor's responsibilities for, and the results of, the auditor's evaluation of other information outside the financial statements. It also features enhancements to existing language in the auditor's report related to the auditor's responsibilities for fraud and notes to the financial statements.

“These proposed changes will make the auditor's report more relevant to investors," said James R. Doty, PCAOB chairman. "More robust audit reports that demonstrate the strength and value of the audit also should lead to better public awareness of, and appreciation for, auditors' skill and insight."

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