Survey: Corporate Board Members Divided on 'Critical Audit Matters'

By:
Chris Gaetano
Published Date:
Sep 13, 2017
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A survey conducted on 130 corporate directors of public company boards has found that there is a nearly even split about whether or not the inclusion of Critical Audit Matters as part of the PCAOB's new auditor reporting model would be useful. The new reporting model, formally approved this year, mandates that the audit report discuss Critical Audit Matters uncovered during the course of the audit. A Critical Audit Matter is defined as parts of the audit that were particularly complex or difficult or required a higher degree of subjective judgment, which were discussed with the audit committee. 

When asked whether the change is an improvement to the transparency and usefulness of the auditor's report for investors, 36 percent said yes, 16 percent were unsure, and 48 percent said no. When asked whether they were concerned about whether the new report's discussion of Critical Audit Matters in sensitive areas could make their jobs as a board member more difficult, the answer was split 50-50 between yes and no. 

The NYSSCPA will be hosting a panel discussion on Sept. 25 on the implications of the PCAOB's new expanded auditor's report. You can register at this link

The survey also found that board members are taking seriously the implementation of new standards in leases, revenue recognition, and credit losses, all of which were major parts of the convergence project undertaken alongside the International Accounting Standards Board. The vast majority, 82 percent, said their boards are actively working to meet these changes and 74 percent said they are engaged with management on the need to communicate the effects of these changes to shareholders. 

The survey also found that 45 percent of board members want a reduction in the 35 percent corporate tax rate, 37 percent want a simplified tax code, 12 percent want tax incentives to repatriate foreign earnings, 5 percent want a lower capital gains tax and 1 percent wannt something else from tax reform. 

Other findings include a slight majority critical of the president's decision to withdraw from the Paris Climate Accord (54 percent), a growth in support for corporate sustainability issues from 24 percent last year to 54 percent this year, a nearly even split over whether the SEC's whistleblower bounties undermine internal anti-fraud and compliance programs (51 versus 49 percent), and a strong belief that they are proactively addressing the issue of board diversity (66 versus 34 percent). 

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