The American Institute of CPAs’ Auditing Standards Board (ASB) weighed in on a recent International Auditing and Assurance Standards Board (IAASB) proposal that suggests ways to improve the auditor’s report, including requiring expanded commentary in auditors’ reports.
The ASB recommended in a comment letter that nonissuers, such as private companies and nonprofits, be scoped out of requirements for “auditor commentary” when the IAASB’s proposed standard is developed.
In its Oct. 8, 2012 letter, the ASB said that auditor commentary would have limited practical relevance for many users of audited financial statements of nonissuers in the United States, and therefore should not be required for nonissuers because of cost/impediment considerations.
The ASB wrote its letter in response to an invitation to comment (ITC) issued by the IAASB, which is examining auditor reporting.
The ASB supported the IAASB’s efforts to enhance the relevance of auditor reporting, and said that many of the proposed changes included in the ITC are directionally important and will result in clearer and more relevant reports for financial statement users. But the ASB wrote that the focus of any changes to auditor reporting should:
- Address information and expectations gaps.
- Maintain or enhance audit quality.
- Define reporting requirements that are clear about management’s responsibility as the original source of entity-specific information.
The ASB wrote that there needs to be a broad-based approach to improving the transparency and relevance of financial reporting that incorporates financial reporting standard setters, management, and those charged with governance – as well as auditors.
The ASB is the AICPA’s senior committee for auditing and attestation.
This story was excerpted from an Oct. 10, 2012 Journal of Accountancy online article, which includes more details about the ASB comment letter and the IAASB proposal.