AN EXAMINATION OF THE PERCEPTIONS OF AUDITORS AND CHIEF FINANCIAL OFFICERS OF THE PROPOSED AUDITING STANDARD INVOLVING OTHER INFORMATION IN AUDIT REPORTS

The typical unqualified audit report of publicly traded firms in the United States indicates the nature of the audit and an opinion that the firm's financial statements fairly present the financial position and the results of operations of the audited company. Accordingly, some users of the financial statements, including investors, do not consider the unqualified opinion to be very useful in providing other informational value about the particular audit. In this paper, the authors examined the views of two stakeholders in the US financial reporting system, auditors in large public accounting firms and Chief Financial Officers (CFOs) in the Fortune 1000. The authors elicited their perceptions involving a Public Company Accounting Oversight Board (PCAOB) proposed auditing standard commonly referred to as "the other information standard." This standard, if adopted, would require the auditor to evaluate information other than the audited financial statements and the related audit report for (1) a material inconsistency, (2) a material misstatement of fact, or (3) both, and if they exist, communicate them in the auditor's report. The authors developed their research instrument based upon its perceived potential effects on the audit if adopted, some of which were referenced in the exposure draft of the proposed standard (PCAOB, 2013). They found that a majority of each groups believed, among other effects, that the proposed standard would increase audit costs, subject both the auditor and the reporting firm to increased litigation risk, and that its implementation costs by affected firms would exceed any benefits to financial statement users created by the standard.