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U.S. comment letter on the auditor's report

Published on: Dec 13, 2013

An excerpt from the comment letter is shown below:

We support the Board’s efforts to increase the informational value, usefulness, and relevance of the auditor’s report. The more information of value that auditors are able to provide to the users of financial statements, the greater the value and relevance audits will have to the capital markets. Additional transparency regarding the audit also stands to enhance investor confidence in the rigor of the independent audit process.

The proposed changes to the auditor’s report would represent the most significant expansion of tailored information provided about a financial statement audit by auditors to the user community in the profession’s history. We are supportive of the objectives of the Board’s proposal, and offer certain
constructive suggestions in this letter geared toward ensuring that the final standards the Board adopts:

  • Add value to users of financial statements;
  • Narrow the expectation gap between what users of financial statements might expect from a financial statement audit and the actual objective of a financial statement audit, which is the expression of an opinion regarding the financial statements taken as a whole based on having obtained reasonable assurance about whether the financial statements are free of material misstatement; and
  • Enhance clarity regarding the responsibilities of the auditor, management, and the audit committee.

Consistent with the above objectives, we are supportive of the following changes to the auditor’s report:

  • Identifying and commenting upon those matters that are critical to a user’s understanding of the audited financial statements;
  • Providing transparency regarding the auditor’s responsibilities for other information included within the Form 10-K;
  • Including a statement that the auditor is required to be independent with respect to the company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the PCAOB and the U.S. Securities and Exchange Commission (SEC);
  • Including additional standardized language regarding the auditor’s responsibilities with respect to the detection of error or fraud and performing procedures to assess the risks of material misstatement; and
  • Clarifying that an audit encompasses the financial statements and the related notes.

Full text of the comment letter is available below.

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