The PCAOB’s proposal requiring additional information in the auditors’ report, is facing opposition from the preparers of financial statements, industry organizations and audit committees. In a recent Journal of Accountancy article, they reported more than 60 companies posting letters on the PCAOP’s website expressing opposition to the proposed requirements for the auditor to include descriptions of “critical audit matters.”
Some of the companies in opposition were, Apple, Chevron, Exxon, and Wells Fargo. Also writing letters in opposition were the Committee on Corporate Reporting of Financial Executives International and the US Chamber of Commerce for Capital Markets Competitiveness.
However, many investor advocates supported the proposed disclosures by the auditors.
This proposal would be the first significant change in the auditor’s report since the 1940s. This change would give the investors more information than the just the “pass/fail” currently provided by auditors on the financial statements.
The following are commonly expressed objections to the inclusion of critical audit matters:
- The auditors would become the original source of some information about the company.
- The information would overlap and possibly conflict.
- Inconsistencies may occur across companies.
The Center for Audit Quality (CAQ), together with members of the auditing profession, will field-test the proposal. It will take months to analyze the results, but they hope to share the results in advance of a round-table meeting the PCAOB is expected to hold regarding the auditor’s reporting model in the spring.
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