Can auditors expand assurance to meet investors’ needs?

By Ken Tysiac

A company’s audited financial statements are among the many pieces of information investors consider when they evaluate where to allocate resources.

But news releases, company presentations, additional information in annual reports, and non-GAAP key performance indicators and financial metrics are also sources of information available to investors.

Auditors are not involved with many of these sources of investor information. Joe Ucuzoglu, CPA, suggested that there is a demand from other participants in the capital markets for auditors to provide more real-time assurance of information that’s outside the financial statements. Ucuzoglu was named chairman and CEO of Deloitte & Touche LLP—the U.S. arm of Deloitte’s audit practice—in March.

“Those metrics are becoming a bigger and bigger percentage of the mix of information that investors are relying upon,” Ucuzoglu said in a telephone interview. “So there is potentially an appetite for auditors to become involved in such a way that we can provide assurance that those numbers that are being relied upon by the markets and are moving stock prices have been, in fact, subject to some form of audit testing.”

Because of the rigorous standards that govern auditing procedures, it would take a collaborative process to expand auditors’ assurance. It’s a process that Ucuzoglu said would have to involve regulators, auditors, preparers, and investors.

Understanding the information investors would like audited would be one of the most important parts of the process. Once that is determined, professional standards—including those of the PCAOB and the AICPA Auditing Standards Board—may need to be changed to enable auditors to perform new or different procedures.

“It’s going to be critically important for the profession to remain at the heart of attesting to the information that’s most important to the markets, and we must have an openness to gravitating our services into those areas,” Ucuzoglu said.

It’s not surprising that an audit executive would advocate for expanding the services that auditors provide. Auditor involvement in new areas or procedures would presumably create an opportunity for Deloitte to boost its revenue. But results of a recent Deloitte survey provide evidence of the desire for these services from other stakeholders in the audit process.

The survey of more than 250 financial statement preparers, audit committee members, and financial statement users shows a desire for auditors to expand their assurance. Sixty-seven percent of financial statement users, 66% of audit committee members, and 66% of preparers said auditors should provide assurance on information beyond traditional financial statements.

With this in mind, the PCAOB’s efforts to expand the auditor’s report are encouraging to Ucuzoglu. The PCAOB’s project, which is scheduled for a reproposal in the second half of this year, originally included a proposal that would require auditors to evaluate information in the annual report that is outside the audited financial statements.

“We want to be working together to figure out which of that information is directly within the auditor’s competence and would benefit from the auditors performing some level of procedures and then telling the investing public what it is we did,” Ucuzoglu said.

The role of technology

Technology also has a pivotal role to play in refreshing and updating the audit to make sure it’s keeping pace with investors’ needs, Ucuzoglu said. Although the Deloitte survey showed broad agreement that the audit in its current form is essential to the effective functioning of the capital markets, it also shows a desire for data analytics to improve the quality and timeliness of audit procedures.

In the Deloitte survey, 84% of preparers, 76% of audit committee members, and 70% of financial statement users said auditors should use advanced technologies more extensively.

Ucuzoglu said Deloitte already is using some of these technological tools on client engagements. The tools enable the examination of much larger volumes of data, which helps auditors focus in on the most important risks. Such innovation can enable higher quality and faster delivery and has the potential to invigorate talent.

“Our people, particularly the next generation, want to be using advanced technologies,” Ucuzoglu said. “They’re excited about the fact that they’re having a hand in shaping the audit of the future and bringing modern technology into the audit process in a way that’s rapidly changing the work that we do.”

Ken Tysiac ( is a JofA editorial director.


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