Alan Beller recently testified at the Public Company Accounting Oversight Board’s (PCAOB) public hearing in Washington, D.C. on the closely watched proposal to enhance the auditor’s reporting model.
The proposed enhancements to the auditor’s reporting model would be the first change to the standards in more than 70 years. Furthermore, they could significantly impact the content and format of auditors’ reports; the treatment of that information by investors and other users of financial statements; and the relationship and structure of interactions among management, audit committees and auditors as they have developed since the enactment of the Sarbanes-Oxley Act of 2002.
Alan, former Director of the Division of Corporation Finance of the U.S. Securities and Exchange Commission and Senior Counselor to the Commission, advises clients on complex disclosure matters, especially financial disclosure, and the legal aspects of accounting and auditing issues. Alan was also counsel to the Co-Chairs of and a member of the Treasury Department’s Advisory Committee (ACAP) on the Auditing Profession that issued its final report in October 2008 that among other things recommended a PCAOB initiative addressing the auditor’s reporting model. The views expressed in his testimony are based on his knowledge and experience as both a government official and a legal advisor to private clients.
Speaking as a member of the panel providing “ Perspectives on the Auditor’s Reporting Model,” Alan supported the PCAOB’s initiative, but offered an alternative approach to changing the report, consistent with proposals in Cleary Gottlieb’s earlier comment letters to the PCAOB on the subject. That approach would directly provide more useful information in the report and thus enhance investors’ understanding. The alternative includes:
Alan stated that he believes the PCAOB’s current proposed standard relating to disclosure of critical audit matters (CAMs) will not improve financial reporting or investors’ understanding for several reasons, including the following:
Alan also expressed concerns with the proposed “ other information standard,” including the following:
For the complete text of Alan’s testimony, please click here.