The Public Company Accounting Oversight Board (PCAOB) gave a new proposal that would require auditors to give more than "pass" or "fail" statements in their audit judgments. For seventy years, auditors were only allowed to give a "pass" or "fail" grade to the financial statements of corporations they audit. Under the new PCAOB proposal, however, they would be allowed to give their commentary on their decisions.
The PCAOB said that they wanted auditors to communicate with investors regarding "critical audit matters." Thus, auditors would now be able to comment on issues where they had to render their subjective judgment or make a difficult decision. They would also be able to write when they had trouble getting the information they needed to come up with a decision.
Aside from these, the PCAOB also proposed that regulators should also disclose the length of time they have been doing auditing work with each client. The PCAOB proposal, however, did not require auditors to analyze or discuss the audit results.
The five-member PCAOB board voted to issue the proposed overhaul but changes in the current "pass" or "fail" system will not likely to come at the end of 2015 at the earliest.
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