Updates and Comparisons Regarding Changes to the Audit Reporting Model in the United States, United Kingdom, and European Union

AuthorBradley P. Lawson,Angela Wheeler Spencer,Vivian O'Hara
Published date01 July 2017
Date01 July 2017
© 2017 Wiley Periodicals, Inc.
Published online in Wiley Online Library (wileyonlinelibrary.com).
DOI 10.1002/jcaf.22278
Updates and Comparisons
Regarding Changes to the Audit
Reporting Model in the United States,
United Kingdom, and European Union
Bradley P. Lawson, Vivian O’Hara, and Angela Wheeler Spencer
The external
audit function in
the United States
is responsible for
evaluating manage-
ment’s assertions and
providing assurance
to stakeholders that
these assertions com-
ply with established
criteria, most often
U.S.-based generally
accepted accounting
principles. The com-
munication between
auditors and stake-
holders regarding the
results of this process
has traditionally been
limited to a one-page
report: the auditor’s
report. Except for the
addition of internal
control opinions as
mandated by the Sar-
banes-Oxley Act of
2002, the format of
the auditor’s report
has changed little
since it was adopted
in the 1940s, with
the auditor issuing
either an unqualified,
qualified, or adverse
opinion concerning
the financial state-
ments prepared by
management. These
opinions are intended
to provide additional
evidence to inves-
tors so that they
can form their own
opinion concerning
the accuracy and fair
representation of the
financial statements.
Many argue,
however, that these
reports follow a
“pass/fail” model
that provides stake-
holders with little to
no new information
In May 2016, the PCAOB proposed some of the
most significant changes to the audit report since
the report was adopted in the 1940s. Among
other things, the changes would require auditors
to disclose within the audit report CAMs, which
are matters that are communicated to the audit
committee and that involved especially challeng-
ing, subjective, or complex auditor judgement.
Although the PCAOB’s latest proposal is not final,
the changes are similar to standards already
adopted by the IAASB. Additionally, PCAOB Chair-
man James R. Doty indicated that he thought the
latest proposal was “the right approach” and that
final rules should be adopted “soon”. This article
provides a timeline of the PCAOB’s proposed
changes, as well as the changes implemented by
the UK and IAASB, discusses changes contained
within the PCAOB’s latest proposal, and compares
those changes to the IAASB’s standards. We also
discuss recent research regarding this topic. Last,
we summarize comments on the PCOAB’s latest
proposal and outline steps that management and
auditors need to take to prepare themselves for
when the final standards take effect.
© 2017 Wiley Periodicals, Inc.
Refereed (Double-Blind
Peer Reviewed)

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT