Between the PCAOB's Proposed Auditing Standard on the Auditor's Reporting Model currently out for public comment (comment deadline: Dec. 11, 2013
), and accelerated rumors about an upcoming PCAOB proposal which some expect "U.S. audit regulators will propose by the end of the year that could require auditors’ names to be revealed in corporate annual reports
" (Emily Chasan, WSJ CFO Journal, 9/13/13), it looks like a paradigm shift in auditor reporting may be in the works.
On a related note, Gerald Keeler and Rick Gallagher wrote in Orrick's Securities Litigation and Regulatory Enforcement Blog yesterday "The Auditor's Report: Is Pass/Fail Enough?"
Also included within their Keeler and Gallagher's post was this observation regarding their opinion on Critical Audit Matters (CAMs), at the heart of the PCAOB's current proposal out for comment:
The implications to our practice are readily apparent. If public companies auditors are required to communicate “Critical Audit Matters” in their reports, there will be more material to second-guess them on if the company they are auditing takes a fall. The more that an auditor discloses to the investing public, in our litigious environment, the more risk (exposure) the auditor will have. In addition, the disclosure of these critical judgment areas has the potential of giving the Plaintiff’s bar a road map to pursue Management and the Board if it turns out that the final decisions made were, in the plaintiffs’ opinion, unreasonable viewed in hindsight.