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Audit & Assurance Update — PCAOB reproposes changes to the auditor's report

Published on: May 27, 2016

This Audit & Assurance Update addresses the PCAOB’s Release 2016-003, Proposed Auditing Standard — The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion and Related Amendments to PCAOB Standards, issued May 11, 2016, which reproposes changes to the auditor’s reporting model. These changes are intended to increase the informational value, usefulness, and relevance of the auditor’s report. While still retaining the current “pass/fail” approach, the reproposal includes several significant modifications to the auditor’s report. The reproposal also modifies several aspects of the PCAOB’s original proposal issued in 2013 regarding changes to the auditor’s report.

In a statement announcing the reproposed standard, James Doty, PCAOB chairman, stated the following:

[I]n today’s complex economy, and particularly in light of lessons learned after the financial crisis, investors want a better understanding of the judgments that go into an opinion — not a recitation of the standard procedures that apply to any audit, but the specific judgments that were most critical to the auditor in arriving at the opinion.

The reproposal does not include a proposed effective date and indicates that the PCAOB’s decision on an effective date will take into account the nature and extent of comments received, and will be subject to approval by the SEC. We encourage all financial statement stakeholders, including audit committees, company management, investor groups, and others, to study the release and submit comments to the PCAOB.

This Audit and Assurance Update provides an overview of the reproposal.


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