While U.S. audit regulators ponder whether there should be changes to the standard auditor's reporting model, the International Auditing and Assurance Standards Board is floating and soliciting some ideas of its own.

The IAASB has published a 35-page consultation paper with some ideas and some questions about how the auditor's report could be reworked to address issues that have emerged in the fallout from the global financial crisis. The paper looks at various options for making the auditor's report more useful to investors, including possible changes to the format and structure of the auditor's report.

The objective, says IAASB, is to determine if there are common views among financial statement readers about how the audit report could be more useful or more informative. The paper provides some discussion on the extent to which audit reports should seek to narrow the “expectations gap,” or the difference between what an audit is intended to accomplish and what it actually does. Auditors have long battled expectations on the part of investors that routine audits should expose fraud. The paper also discusses the more recent investor demands to close the “information gap,” or information that investors want to see added to audit reports, primarily as a result of major corporate failures that weren't foretold in audited financial statements or audit reports.

“Investors and financial analysts have signaled to us they want additional, and more pertinent, information for their decision making,” said James Gunn, IAASB Technical Director, in a statement. “The IAASB wants to better understand these views, as well the views of others.” That would include users of audited financial statements of small- and medium-sized entities and public sector organizations, preparers, auditors and other key participants in the financial reporting process, he said.

The Public Company Accounting Oversight Board has heard the same demands in the United States and is working on a similar discussion paper to be issued this year, perhaps this summer, said PCAOB Chairman James Doty. The PCAOB's Investor Advisory Group presented the PCAOB with the results of their own survey and made a detailed case for updating the auditor's reporting model.

The investor group asked the PCAOB to consider requiring auditors to produce their own narrative to describe the key issues that they addressed in the audit and explain how they were resolved. Investors also want more information from auditors about estimates and judgments, as well as sensitivity analysis around significant judgment areas, unusual transactions, restatements, and accounting policies and practice. They also shared some support for requiring the audit engagement partner to sign the audit report in his or her own name rather than just the firm's name.

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