Sunday, April 17, 2011
For many years, auditors have communicated their opinions in Auditor's Reports based on standard guidelines. The profession has developed, and commonly uses, the equivalent of form letters to communicate the auditor’s opinion on the audited financial statements. The standard opinions are unqualified, qualified, adverse, or disclaimer, depending on the results of the audit. However, in March 2011, the PCAOB announced its intentions to consider mandating changes to the Auditor’s Reporting Model, suggesting that the majority of investors desire more information in such reports.
The Auditor's Report is the primary means auditors use to communicate their opinions with investors and other users of audited financial statements. The standard form letters and their disclosure parameters have “boxed in” auditors in the past in their communications with such readers. However, with the PCAOB's direction, more transparency in the auditor's report may give more valuable information to the end-user.
A few auditors may currently incorporate more transparency in their reports in considering the end-user, as well as their obligation, per existing standards, to keep audit risk low. However, the majority currently box themselves in with the established form letters, wanting to maintain the status quo and keep their client satisfied, without properly considering the end-user of the report. Their consideration for what constitutes low audit risk when evaluating the client’s published financials, the audit findings, and their required responsibility to the end-user, ends up being less than prudent due to this current “boxed in” mentality.
As an auditor, I am excited about what the PCAOB may possibly accomplish with a revised Auditor’s Reporting Model. Moving more auditors toward increased transparency can only serve to make our profession better by adding greater value to the Auditor’s Report for the benefit of the end-user.
Theresa Barnett, CPA, CIA
www.tbarnettcpa.com
The Auditor's Report is the primary means auditors use to communicate their opinions with investors and other users of audited financial statements. The standard form letters and their disclosure parameters have “boxed in” auditors in the past in their communications with such readers. However, with the PCAOB's direction, more transparency in the auditor's report may give more valuable information to the end-user.
A few auditors may currently incorporate more transparency in their reports in considering the end-user, as well as their obligation, per existing standards, to keep audit risk low. However, the majority currently box themselves in with the established form letters, wanting to maintain the status quo and keep their client satisfied, without properly considering the end-user of the report. Their consideration for what constitutes low audit risk when evaluating the client’s published financials, the audit findings, and their required responsibility to the end-user, ends up being less than prudent due to this current “boxed in” mentality.
As an auditor, I am excited about what the PCAOB may possibly accomplish with a revised Auditor’s Reporting Model. Moving more auditors toward increased transparency can only serve to make our profession better by adding greater value to the Auditor’s Report for the benefit of the end-user.
Theresa Barnett, CPA, CIA
www.tbarnettcpa.com
