September 15, 2011

CAQ Comments on PCAOB’s Public Roundtable on the Auditor’s Reporting Model

Washington, D.C. – The Center for Audit Quality (CAQ) issued the following statement from Executive Director Cindy Fornelli regarding the Public Company Accounting Oversight Board’s (PCAOB) public roundtable on possible changes to the auditor’s reporting model:

“The CAQ supports the PCAOB in reaching out to stakeholders for additional insights into its concept release on possible changes to the auditor’s reporting model. The Board has taken a thoughtful approach to this issue, as demonstrated by providing this additional opportunity for investors and other financial statement users to discuss the alternatives presented in the concept release.

The CAQ recognizes that change is needed in this important area and is prepared to embrace calls for responsible modifications to the auditor’s reporting model that can be practically implemented. To this end, the CAQ established a working group in 2010 to consider how to better serve the information needs of investors, as we understand them, and has provided the PCAOB with suggested approaches for potential revisions to the auditor’s reporting model. Consistent with our initial June 28 comment letter to the PCAOB, we believe consideration of revisions to the auditor’s reporting model should be guided by five overarching principles, with investors in mind:

  • Management should continue to be the original source of disclosure regarding a corporate entity; 
  • Any changes to the reporting model need to enhance, or at least maintain, audit quality; 
  • Any changes to the reporting model should narrow, or at least not expand, the expectations gap; 
  • Any changes to the reporting model should add value and not create investor confusion. Specifically, any revisions should not require investors to sort through “dueling information” provided by management, the audit committee, and independent auditors; and 
  • Auditor reporting should focus on the objective rather than the subjective. 

The public company auditing profession is listening to what investors are saying and is prepared to implement change under a framework that will provide for consistency of approach – in the United States and around the world.”

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The Center for Audit Quality (CAQ) is an autonomous public policy organization dedicated to enhancing investor confidence and public trust in the global capital markets. The CAQ fosters high quality performance by public company auditors, convenes and collaborates with other stakeholders to advance the discussion of critical issues requiring action and intervention, and advocates policies and standards that promote public company auditors’ objectivity, effectiveness and responsiveness to dynamic market conditions. Based in Washington, D.C., the CAQ is affiliated with the American Institute of Certified Public Accountants. For more information, visit www.thecaq.org