Changes to the auditor’s report for non-issuers

By Laura Hay, CPA, CAE, OSCPA executive vice president

A new group of audit reporting standards proposed in November by the AICPA Accounting Standards Board aims to increase the transparency of the auditor’s considerations in issuing an opinion. Proposed changes to the report include:

• Presenting the opinion first, followed by a basis for opinion section including the auditor’s adherence to ethics and independence.
• Expanding the description of management’s responsibilities for the financial statements.
• Expanding the description of the auditor’s responsibilities to include key components of the audit.
• Including a new separate section for going concerns, when present.

These changes take into consideration reporting projects of the IAASB and PCAOB. In addition to an expanded opinion, the proposed standards would provide the option of communicating key audit matters (KAMs) in the report.

In a review of the proposed standards, the OSCPA Accounting and Auditing Committee had significant concerns about the trickle-down impact of providing the option for SEC-like disclosures of KAMs in audit reports for non-issuers. Concerns included:

• Entities feeling compelled by certain users of the financial statements or board members who come from a public company environment or who seek to emulate public company reporting.
• Non-issuers having the required time and resources.
• Whether boards would sufficiently understand the costs and risks involved.
• Space constraints to sufficiently address topics regarding risks.

What do you think? Should non-issuers be provided the option of including KAMs in the audit report, or do the risks outweigh the value? Share your comments below.