I realize that VeraSage is famous for more important issues than the auditor’s report. However, I have been challenging the status quo to improve the auditor’s report since at least 2001. Essentially all auditor’s reports read the same, use the same paragraphs, and sentences (and too frequently even the same font). Therefore customer and users can not easily differentiate audit reports from one firm to another. And comparison and contrasts between service providers ultimately leads to better consumer information.
Yesterday, I co-presented, along with fellow CPA Dan Dangel a course on the new audit risk standards. During the seminar, I suggested that one of the challenges our profession faces is that our sameness impacts our ability to drive better pricing, recruit and retain human capital, and essentially places a damper on the future of our profession.
During a specific conversation on materiality and how it should be determined I suggested that maybe the first step to improving our audit reports would be to include the level of materiality used in performing the audit. The gasp from the audience was audible out the room and down the hall. After being told we could not add that to the report, I asked specifically why not? My understanding of the auditor’s report is that it must include certain items but nowhere do the rules state that we cannot add items necessary for clarification and communication.
Would the reader of audited financial statements utilize and appreciate knowing the level of materiality used to test and determine the correctness and completeness of the associated financial statements? And would the associated customer want that level of materiality disclosed. Should materiality be kept secret by the firm or should it be disclosed?
Interesting question. I think we need to experiment more and test more practices that were old before I entered the profession.
What do you think? I look forward to your comments.