PCAOB Weighs Proposal to Make Auditors Explain Work

Audit watchdog suggests 'possible enhancements' to auditor's report.

The Public Company Accounting Oversight Board is seeking comment on proposed changes that may require auditors of U.S.-registered firms to explain their findings rather than simply saying whether rules were followed.

The PCAOB, the Washington-based watchdog for firms that review companies’ books, issued a statement today on “possible enhancements” of the model for the auditor’s report, which it called a primary means for communicating with investors.

“The auditor is in a unique position to provide relevant and useful information,” Martin F. Baumann, the PCAOB’s chief auditor and director of professional standards, said in the statement. “The concept release explores ways to expand the auditor’s communication” about a report and a company’s financial statements.

PCAOB Chairman James Doty said the release is a significant move for investor protection in response to the 2008 financial crisis and the first step toward reforms designed to improve the relevance, transparency and reliability of the audit process.

The regulator, created by the Sarbanes-Oxley Act of 2002 and overseen by the Securities and Exchange Commission, will accept comment on the concept release through Sept. 30 and plans to hold a public meeting on the proposal later this year.

 

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