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State Board Report

April 2014

The first panelist addressing the Public Company Accounting Oversight Board’s April 2-3 panel on the “Auditor’s Reporting Model” was NASBA Past Chair Gaylen R. Hansen. He provided the historical background for the PCAOB’s current project, reminding all of the 2008 recommendations from the Department of the Treasury’s Advisory Committee on the Auditing Profession (ACAP), as he had served on ACAP’s Subcommittee on Firm Structure and Finance. The ACAP did its work in the midst of the economic meltdown, he recalled, and while the auditors were not blamed for the meltdown, “This was a chance to do something meaningful… We were interested in a substantive fix, increased accountability and transparency with real teeth, which is why we are here today.” Looking at the standard auditor’s report, which has not changed in more than 70 years, Mr. Hansen said, “We can do better – and doing it is long overdue.”

Mr. Hansen stated that “overall, I’m comfortable with the changes proposed” in the PCAOB’s Auditor’s Reporting Model, as the proposal “fixes several glaring shortcomings in the current model.” In his background paper he explained these changes include:

  1. Reporting critical audit matters (CAM);
  2. Reference explicit to the auditor’s responsibility to detect material error or fraud;
  3. Disclosure of audit firm tenure;
  4. Assurance on other information accompanying the financial statements;
  5. Identification of the audit engagement partner;
  6. Reference to independence in the body of the proposed report.

 

“While client confidentiality has a long-standing and respected place in the accounting profession, …it doesn’t serve investors well when it is parlayed to obfuscate the important obligation to call things as they are seen,” Mr. Hansen said. He pointed out: “Other major players on the international scene are moving rapidly to require more informative auditor reports – with or without the U.S. in tow.”

The two-day PCAOB conference included many speakers whose presentations can be found on www.pcaobus.org.

> Read Mr. Hansen’s presentation to the PCAOB

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