“Exciting and challenging times” coming for auditors


International auditing standards appear set for a period of substantial change as investors seek more information, new forms of reporting emerge, and companies look to provide assurance on additional items.

The International Auditing and Assurance Standards Board (IAASB) plans to release an exposure draft in June in its ongoing project on the auditor’s reporting model.

In addition, the IAASB has formed a working group to explore issues such as auditing or assurance on:

  • Integrated reports.
  • Corporate governance statements.
  • Earnings releases and even preliminary announcements associated with them.
  • XBRL-tagged data.
  • Management discussion and analysis (MD&A).

“Some users have said we would like to see the auditors explore more in association with that information [above], but we are just starting to look at the process of what possibly could be done,” IAASB Deputy Chair Dan Montgomery said Thursday after a presentation at the New York Society of Security Analysts’s international financial reporting conference in New York City.

The IAASB is an international body that develops auditing and assurance standards and guidance that regional and national standard setters can adopt. The IAASB’s highest-profile current project is its exploration of potential changes to the auditor’s report.

The PCAOB also is in the midst of a project to develop a new auditor’s reporting model. This has been a challenging project for the PCAOB and the IAASB.

“There’s a wide range of views of what should be in an expanded auditor’s report,” PCAOB member Jay Hanson said Thursday “…We are really challenged with reconciling the views of constituents on that because there’s no single, uniform view, even among investors.”

Take the issue of auditor commentary, for example. The IAASB proposed that additional information be provided in the auditor’s report as “commentary” to highlight matters that the auditor believes will be most important to users’ understanding of the audited financial statements or the audit.

Montgomery said there is general agreement that auditors must provide more and better information. But there is little consensus on the type and amount of information that should be provided. Preparers don’t want auditors to overstep their bounds and report information that should be provided by management.

Some auditors have expressed the fear that a requirement to provide more information could subject them to legal jeopardy from investors if they don’t identify a potential problem that causes a company to lose value.

BlackRock Managing Director Steven Buller said Thursday that providing information specifically on audit procedures is unnecessary. But IAASB Technical Director James Gunn said other financial statement users have expressed a desire to see that information.

Montgomery said it will be difficult to reconcile all those views.

“The whole thing will be challenging,” Montgomery said. “But I think it will be much less challenging to identify the types of matters that might be highlighted. And much more challenging to determine what exactly might be said about those matters.”

The projects that will be undertaken by the working group have a much longer time horizon. Nonetheless, Montgomery anticipates that as organizations such as the International Integrated Reporting Council develop standards, there will be a demand for auditing the reports produced in accordance with those standards.

“These are, indeed, exciting and challenging times for auditors and standard setters,” Montgomery said.

Ken Tysiac ( ktysiac@aicpa.org ) is a JofA senior editor.


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