According to the CFA Institute, there is a growing worldwide debate on the usefulness of the independent auditor’s report. The current “pass/fail” model simply communicates that the financial statements are, in the auditor’s opinion, presented in accordance with generally accepted accounting principles, but there is no information available on how the auditor addressed the risks of material misstatements identified during the audit process. While it is clear that more information about the quality of the financial statements and the audit process might be useful, it is not clear what kind of information should be communicated through the auditor’s reporting model.
The CFA Institute sought feedback on this topic to assist in informing the audit standards-setting bodies as they consider how to modify the Independent Auditor’s Report to ensure that the user needs are being considered in any proposed changes. Survey results show that 58% think that the independent auditor’s report needs to provide more specific information about how the auditors reach their opinion. The most important additional information to include is: information about the independent auditor’s assessment of management’s critical accounting judgments and estimates (86% felt this was important to include); and, information about the independent auditor’s assessment of the quality, not just the acceptability, of management’s selection and application of accounting principles (90% felt this was important to include).
(For more information, read the March 2011 CFA survey report, Usefulness of the Independent Auditor’s Report, available online.)
The CFA Institute sought feedback on this topic to assist in informing the audit standards-setting bodies as they consider how to modify the Independent Auditor’s Report to ensure that the user needs are being considered in any proposed changes. Survey results show that 58% think that the independent auditor’s report needs to provide more specific information about how the auditors reach their opinion. The most important additional information to include is: information about the independent auditor’s assessment of management’s critical accounting judgments and estimates (86% felt this was important to include); and, information about the independent auditor’s assessment of the quality, not just the acceptability, of management’s selection and application of accounting principles (90% felt this was important to include).
(For more information, read the March 2011 CFA survey report, Usefulness of the Independent Auditor’s Report, available online.)
