It's probably safe to assume that auditors are preparing to swallow some changes to the long-standing boilerplate report they attach to public company financial statements, but they will lobby against the most extreme ideas for narrative discussions or disclosures about close calls. Safe, that is, if the Center for Audit Quality can be seen as a proxy for auditors' views.

Supported largely by the audit firms themselves, the CAQ is making a quick jump out of the gate with its views on how the auditor's report might be altered. It provided a preliminary comment letter, with a promise of more to come, to the Public Company Accounting Oversight Board only a week after the board published a concept release asking for ideas on what should be changed.

CAQ Executive Director Cindy Fornelli told a national accounting conference that she sees some consensus around potential improvements to the existing auditor's reporting model, and that auditors are bracing for change. “Let me assure you that the public company auditing profession is listening hard to what investors are saying and is prepared to implement change under a framework that will provide for consistency of approach,” she said.

She also related concerns, however, about the most extreme ideas for changing the audit report, that auditors should provide narrative disclosures about their work and reveal where their view of financial statements might differ from management's view. “Auditors should not be the original source of disclosure about the company,” she said. “Any revisions should not require investors to sort through dueling information provided by management, the audit committee, and independent auditors. Auditor reporting should focus on the objective rather than the subjective.”

Fornelli said she liked the PCAOB focus on an “emphasis of matter” approach, where auditors would call extra attention to specific areas of the financial statements where they paid closer attention in their own work. She said she also likes the idea of asking auditors to produce a supplemental report on their examination of critical accounting estimates that are discussed in the management discussion and analysis. The CAQ has even provided the PCAOB with models that might be used in developing such auditor reporting.

The PCAOB is holding a roundtable on Sept. 15 to gather views from various stakeholders on how the auditor's report could be modified to draw more information out of auditors. It might be safe to assume Fornelli will be there.