Center For Audit Quality - The Role of The Auditor

The Role of The Auditor

The CAQ launched an initiative on the Evolving Role of the Auditor to explore potential changes to the role of the auditor in light of changing market practices and investor information needs. The initiative began with a series of roundtables in Dallas, New York, San Francisco, Chicago and Toronto between May and July 2011. Investors, the public company auditing profession, regulators, standard setters and other stakeholders were asked whether there is more that auditors can do to help investors better understand the key financial risks within a company. Participants discussed how the auditor’s role might evolve to improve financial reporting beyond the boundaries of the audit of financial statements and internal control over financial reporting.

The results of the roundtable discussions were released in the 2011, Observations on the Evolving Role of the Auditor: A Summary of Stakeholder Discussions. The report states that participants believe the audit is valuable and should not go away. Participants also want auditors to retain the attest function and not expand their reach into the realm of management by asserting new information about a company. Nevertheless, the participants observed that there is more that all participants in the financial reporting process, including independent auditors, can do to make corporate reporting more relevant for investors.

The CAQ continues to explore this issue through continued dialogue with stakeholders and policymakers and is committed to the goal of investor confidence in our financial reporting system and the checks and balances that underlie that system.

In March 2012, the CAQ held a workshop to further explore the observations made during the roundtable series over the course of 2011 on the evolving role of the public company auditor. More than 30 workshop participants gathered in New York on March 12 to consider how the public company auditor’s role might change to meet the needs of investors. Over half of the workshop participants were investors and buy-side analysts; the remainder was a mix of audit committee members, preparers, auditors and others.

Workshop participants explored key areas that had been flagged at the roundtables, including the benefits of auditor involvement with financial information disclosed by management outside of the audited financial statements; specifically, Management’s Discussion and Analysis (MD&A), earnings releases, and key performance indicators (KPIs).

Summary of Workshop on the Evolving Role of the Auditor, a report on the results of the Workshop, was released in May 2012. Workshop observations include: • Non-GAAP disclosures are important to investors’ decision making processes, although audited financial statements provide a baseline; • More consistency and comparability is warranted in the use of KPIs in MD&A and earnings releases; • Investors want to hear directly from management; auditor involvement with information outside the financial statements could add an unwanted “filter”; and • Some investors would like to see a requirement that the auditor read and discuss the earnings release with the audit committee or perform a limited review.