U.S. auditors may soon be required to change the format of their audit reports as audit regulators consider growing demands to update the traditional reporting model.

The staff of the Public Company Accounting Oversight Board is conducting research and consulting with focus groups to explore alternatives to the current reporting model, said Daniel Goelzer, acting chairman of the PCAOB, at a national conference of the American Institute of Certified Public Accountants today. The staff will present its findings to the board in early 2011, Goelzer said, and the board expects to publish a concept release in mid-2011 followed by a roundtable to solicit feedback.

“It is clear there is considerable investor hunger for more insight from the auditor into the audit process and the company's financial reporting,” Goelzer said. The Treasury Advisory Committee on the Auditing Profession also called on the PCAOB to take a fresh look at the audit reporting model, and regulators in other countries are looking at ways to expand the auditor's report. The international effort is led by groups such as the International Organization of Securities Commissions, the International Auditing and Assurance Standards Board, the European Commission, and the United Kingdom's Financial Reporting Council, Goelzer said.

Martin Baumann, chief auditor of the PCAOB, said the auditor's reporting model will be a high priority for the board's standard setting process in the coming year. “I expect you'll see action in the near term from other international standard setters and regulators on this as well,” he said at the same conference.

Baumann said his office is conducting outreach with investors, investor groups, auditors, preparers, academics, regulators and others to gather a variety of views on what a new auditor's report might contain. “Investors and other users are saying they need to hear much more from the auditor,” he said. “Investors want to hear more about the auditor's view of those financial statements, especially about significant judgments and estimates in the statements and the quality, not just acceptability, of the company's accounting policies.”

Goelzer said the board and staff are hearing plenty of ideas about what the audit report should contain – more information about the audit itself and how it was performed, auditor's views on management judgments in the financial statements, information about the limitations of the audit to detect fraud, or a separate report by auditors that looks and feels like management's discussion and analysis. Auditors have raised plenty of concerns as well, such as whether it would lead to new audit requirements, new standards, and new liability risks, Goelzer said.