PCAOB proposes biggest shake-up to US audit reports since 1940s

US AUDITORS have been told to reveal more information about the listed companies whose books they vet, under sweeping proposals unveiled by America’s accountancy watchdog.

The PCAOB, set up ten years ago in the wake of the Enron scandal, earlier this week proposed a new auditor reporting standard that, if implemented, will represent the biggest shake-up to US audit reports since the 1940s.

Three years in the making, the new rules will require auditors to provide much more information in the audit report that accompanies a company’s annual report.

“These proposed changes will make the auditor’s report more relevant to investors,” said James Doty, chairman of the PCAOB [pictured]. “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.”

The proposed standard would retain the pass/fail model in the existing auditor’s report, but would provide additional information to investors and other financial statement users about the audit and the auditor.

Under the proposals, auditors would be required to disclose “critical audit matters”; information related to auditor independence, auditor tenure, and the auditor’s responsibilities for the evaluation of other information outside the financial statements; and enhancements to existing language in the auditor’s report related to the auditor’s responsibilities for fraud and notes to the financial statements.

“The goal of these proposed standards and amendments is to significantly improve the current auditor reporting model by requiring the auditor to communicate specific information about each audit based on audit procedures performed,” said Martin Baumann, PCAOB chief auditor and director of professional standards.

Comments on the proposed standards and related amendments are due by 11 December.