PCAOB Outlines Possible Changes to Audit Reports
Ernie Baugh, national director of professional standards at Mayer Hoffman McCann P.C., comments in Compliance Week on the Public Company Accounting Oversight Board publishing a concept release last week on how to require auditors to give investors a better understanding of where they believe companies may have the greatest risks in their financial statements.
In the article, Ernie states the idea of an Auditor’s Discussion and Analysis (AD&A), in particular, will be problematic. “The AD&A would be just a blueprint for the plaintiff’s bar,” he says. “No major firm is going to allow engagement partners to write whatever they think without putting it through a stringent review. It’s going to be expensive.” Emphasis paragraphs might be more achievable, he says, but auditors will worry that their judgments about what to emphasize will become targeted for second guessing by regulators and litigators.