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Deloitte comments on proposed rules on audit reporting requirements

Published on: Aug 23, 2017

Deloitte & Touche LLP comments on SEC Release 34-81187, "Notice of Filing of Proposed Rules on the Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion, and Departures From Unqualified Opinions, and Other Reporting Circumstances, and Related Amendments to Auditing Standards," which were issued in July 2017.

An excerpt from the comment letter is shown below: 

We support the objectives of the proposed rule and believe the new auditor reporting requirements will result in achieving the overall objective of enhancing the communications about the audit and the usefulness of the auditor’s report to investors and other financial statement users. The more information of value that auditors are able to provide to the users of financial statements, the greater the value and relevance of audits to the capital markets. Additional transparency regarding the audit also enhances investor confidence in the rigor of the independent audit process.

With respect to disclosure of audit firm tenure, we understand and support the desire for transparency. However, placement of this disclosure in the auditor’s report will not be most meaningful to investors. As both PCAOB and Commission officials have publicly stated, auditor tenure is one possible consideration in an audit committee’s analysis when evaluating and appointing an audit firm. Long audit tenure was recognized recently by a Commission official as having potential benefits, but there is no ability to provide this underlying context in the auditor’s report. Accordingly, we encourage the Commission to instead consider placement of such disclosure in the proxy, where the appropriate context regarding the audit committee’s selection and oversight of the external auditor can be provided.

Further, we encourage the SEC to support the PCAOB in its plans to (i) monitor implementation of new auditor reporting requirements, in particular the reporting of critical audit matters and (ii) conduct a post implementation review of the requirements.

Full text of the comment letter is available below.


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