International Audit Firms Call for New Reporting Model and Int'l Audit Standards

In what may well become a seminal document, the CEOs of six international audit firms have called for a new corporate reporting model based on the Internet and digitization that can provide investors with real-time customized financial information. The new model would provide a mix of forward-looking non-financial information and historical financial information under a principles-based system. At the same time, the firms urged the FASB and the IASB to complete the harmonization of reporting standards, with a tilt towards the IASB’s principles-based regime. The six firms are the Big Four, plus Grant Thornton International and BDO International. The full text of the white paper is on the IASB website.

They also advocated the launching of a similar process to implement international auditing standards. The ultimate goal is the disclosure of reliable and timely information that can be compared across jurisdictions and that measures past performance and provides the best possible projections about future performance.

In addition, while recognizing that enforcement will also be impacted by national sovereignty, the firms urged auditors to minimize the national differences in the oversight of auditors and the enforcement of audit standards. The recently established International Forum of Independent Audit Regulators (IFAR) could be the vehicle to harmonized regulation. The audit firms are encouraged by recent statements from the PCAOB that it intends to join and actively participate in IFAR.

An underlying presumption of these goals is that the current system of auditor liability will be reformed so that audit firms are not the insurers of last resort for the markets. Entire firms should not be put a risk because of the conduct of some fraudulent actors.