Proposals released earlier this week to improve the transparency of corporate audit reports could be helpful to investors, says Fitch Ratings in a new report.
On August 13, the U.S. Public Company Accounting Oversight Board (PCAOB) presented a proposal that would require auditors to provide more detailed and descriptive audit reports in an effort to better inform investors; which Fitch says will probably “be helpful for investors and likely help highlight major financial reporting issues.”
The rating agency notes that the current requirements are essentially just boilerplate “and of little incremental informational value”. And, it worries that some elements of the PCAOB’s proposal “might also be met with a similar boilerplate response to today’s audit report.”
Nevertheless, it suggests that the proposal to enhance the value of the audit report by including disclosure of key audit matters, “would likely be helpful”, as it could provide additional information about factors that affect credit ratings. “If this new section is successful in disclosing what is “on the auditor’s mind” then that may help assess factors relevant to our ratings,” it says.