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Recent developments likely to affect you...


2014 Could Be a Break-Through Year for Audit Reforms

Investors could finally reap the benefits in 2014 of several multi-year projects underway to enhance auditor reporting and independence.

In December 2013, the Public Company Accounting Oversight Board (PCAOB) reproposed its controversial amendments aimed at improving the transparency of audits. The proposal would require the disclosure in the audit report of the name of the engagement partner and certain other participants in the audit. In addition to providing the names of the other persons or entities that participate in the audit, external auditors of public companies would need to provide the other participants' locations, (i.e., the country in which the entity is headquartered or the person resides). This information should be especially useful in audits of companies with multiple locations and international operations on which the firm that signs the audit report does only a portion of the audit. 

Another change in the works would expand auditor reporting in the US to include more commentary on critical audit matters, such as management's judgments and estimates, accounting policies and practices, and difficult or contentious issues including those the PCAOB refers to as "close calls." And still another change being considered by the Board would reduce the share of the audit that can be outsourced without disclosure from 20% to 5%. Although these would be significant changes, some critics are demanding even more. In Europe, regulators are considering requiring public companies to put their audits out for bid every ten years or to change auditors every 15 or 20 years. So far, US regulators have been reluctant to embrace a similar rule for US companies.  




Rosemary Schlank


Center for Financial and Accounting Literacy


Center Salutes Life and Legacy of Accounting Icon Ben Neuhausen

Ben lost his courageous battle with cancer on July 31, 2009. Though his distinguished career ended far too soon, Benís accomplishments were many, and he leaves a rich legacy of memories that are overflowing with lessons in both literacy and life. Read our summary of his views and accomplishments.


Quality-of-Accounting Scorecards

Are US accounting standards getting better or worse? Are they more user-friendly for investors? Do they lead to better decisions? The Center monitors key benchmarks, including progress toward noteworthy reports and recommendations. You can trust our Scorecards for an objective assessment. (The scorecards are being updated and will be available soon.)


Recent Articles by Rosemary Schlank

Key to Tax Governance:

Straight Talk about Tax Risks

Ready for FASB's Accounting Standards Codification?

E-merging Issues and Trends

Improving Transparency in Turbulent Times

Disclosures and Audit Committees are Key in Turbulent Times

Financial Reporting in Turbulent Markets

New Accounting for M&A Affects Earnings and Deals

XBRL: What Should Companies Do Now?

Financial Reporting Directions Drawn From the Top Governance Issues of 2005

FASB Must Weigh Costs and Benefits of Accounting Changes Expected in 2005


Changing Capital Markets - Risks for the Information Age




Accounting Standards Codification


Improvements are expected in the FASB's Accounting Standards Codification. Introduced in 2009, this source of US authoritative accounting literature is a compilation of standards issued by the FASB over the years. Many sections of text were intentionally left unchanged from the words originally written years ago, and the writing is not always clear. Recently, FASB Chair Russ Golden announced that the section on liabilities and equities is being rewritten and the FASB intends to look for other ways to make the Codification more user-friendly. 

More Accounting Topics


XBRL Reporting

The use of eXtensible Business Reporting Language (XBRL) for SEC filings has been error-prone and is not proving as beneficial to the SEC and investors as originally expected. Introduced in 2009 for the largest public companies, XBRL is a technology that allows companies to tag the information provided to the SEC in a way that allows investors and prospective investors to read the tags and interact with the data. A Congressional committee has asked the SEC to explain how it uses the XBRL information and how it intends to correct the problems with the quality of the information provided.

More Technology Topics


Enhancing the Value of Audit Committee Reports in 2014


Audit committees of boards of directors of public companies play an important role in keeping the capital markets safe. But do these watchdogs communicate the right information to investors?

In November 2013, several prominent governance advocates issued a "Call to Action," urging all public company audit committees to strengthen their reports to investors, if necessary.  

The key areas of current focus include the adequacy of information about:

  • The length of the external auditor's tenure.

  • The audit committee's involvement in the selection of the lead audit partner.

  • The factors considered by the audit committee in selecting or reappointing an audit firm and in determining auditor compensation

  • The criteria or metrics used to evaluate the effectiveness of the auditor throughout the year.

More Governance Topics

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Frequently Used Abbreviations

AICPA American Institute of Certified Public Accountants
CAQ Center for Audit Quality
FASB Financial Accounting Standards Board
FTC Federal Trade Commission
GAO General Accounting Office
GAAP Generally accepted accounting principles
IASB International Accounting Standards Board
IFRS International Financial Reporting Standards
IFAC International Federation of Accountants
IRS Internal Revenue Service
PCAOB Public Company Accounting Oversight Board
SEC Securities and Exchange Commission
XBRL eXtensible Business Reporting Language

 Full List



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