The International Auditing and Assurance Standards Board is pushing a proposal for expanding commentary in auditor reports. The American Institute of Certified Public Accountants has responded by pointing out that private companies and other non-issuers of public securities should have an exemption from the new processes. According to the AICPA Auditing Standards Board, the proposed IAASB standards have limited relevance to non-issuers in the US that rely upon accountants to apply audit expertise from CPA preparation courses.
The aim of the IAASB is enhancing the relevance of auditor reporting by rendering greater clarity to financial statement users. The ASB generally supports this effort by acknowledging that users of financial statements often lack knowledge about the scope of audit standards that accountants understand from CPA exam courses. However, the ASB wants assurance that that IAASB changes either enhance audit quality, define obligations of management compared to auditor requirements, or address gaps of information within an audit.
IAASB proposed changes include requiring auditors to highlight factors they believe are important to understanding the audited financial statements. Also proposed is an auditor statement specifically identifying material inconsistencies between financial statements and other information. Another new feature adds an auditor conclusion about management’s going concern assumptions along with a statement about material uncertainties related to going concern matters.
Although each of these considerations are part of the audit techniques described in CPA review courses, the ASB is apprehensive about explicit statements in the audit report that are beyond the scope of many audit engagements. For instance, the ASB said that auditor statements about going concern subjects should note the role of management over this issue. Financial statements users could become confused my mistakenly believing that auditors are responsible for identification of any event that signals a going concern warning.
Additional items noted by the ASB included the comment that disclosures regarding auditor involvement are useful only when they do not detract from the principle of sole responsibility learned by accountants in study for CPA exam preparation. Also, the ASB pointed out that consistency in reporting is best achieved by standard setters in each country establishing the order of required reporting elements.
Most importantly, the reporting enhancements already adopted recently by the AICPA render improved utility of reports for non-issuers without the cost and impediments of the IAASB proposals. For example, the ASB stated that including the name of the partner from the firm engaged for an audit adds no value to an auditor report. It is a common practice outside the US. However, the AICPA is the US standard setter and therefore steers courses for CPA exam candidates to prepare US auditors for reporting that is most suitable to American enterprises.
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