PCAOB's Proposed Auditor Reporting Model

Last month, the Public Company Accounting Oversight Board ("PCAOB") proposed new standards for auditor reports that, if adopted, would dramatically change the role and the responsibility of audit firms in the financial reporting process—and not for the better. The proposed standards would require auditors to discuss "critical audit matters" relating to the audit, which are those matters the auditor addressed that involved the most difficult, subjective, or complex auditor judgments, or that posed the most difficulty to the auditor in obtaining sufficient evidence or in forming an opinion on the financial statements. Even more troublesome, the proposed standards would also require the auditor to evaluate "other information" that is included in a company's annual report filed with the SEC in order to identify material inconsistencies between the information and the company's audited financial statements and material misstatements of fact contained in the annual report—in