At the start of April I watched with interest the US Public Company Accounting Oversight Board’s (PCAOB) public meeting on the auditor’s reporting model. The meeting was considering whether the US should follow part or all of the changes now adopted in the UK.

Of particular interest was a session on the second day attended by four contributors from the UK, which included representatives from the audit profession (including Tony Cates KPMG’s UK head of audit), audit committees and investors. While there was some variation of view, the clear tone was a positive reaction from all to the recent changes. So what are the advantages?

Personally I have found the adoption of these new reports a very thought provoking exercise. As an auditor there has been a real challenge to explain to the lay reader what an audit actually involves. I think this offers a real advantage for auditors in allowing them to remove the mystique around what auditors do.

It has also brought more clearly into focus the differing responsibilities of executives, audit committees and auditors. Enabling each to challenge the other on how they have concluded on particular positions. I think this has enabled audit committees to get more involved in the year end process and given them more leverage to challenge management and the auditors.

For investors there is now more clarity available on where the auditor sees the risks and how this has been responded to in the audit. This removes the audit from a black box and while of course it does not cover the totality of the work, I believe provides real insight into the key issues of concern to the auditor.

Lessons to be learned

So how do we build on these initial gains? I think there are a number of immediate lessons to derive from comparing reports that have been issued.

For investors there is now more clarity available on where the auditor sees the risks and how this has been responded to in the audit

Not all provide the same level of detail and insight and I very much hope the best in class will become the norm as we move forward. Are auditors then ready for the next step, which must surely be to tell investors what we found from our work on those risk areas? We have already seen some limited examples of this and the response has been positive, particularly from the investor community.

Whether all this will be too much for the more litigious US environment remains to be seen, but it is good to see the UK leading the way in this important area.

Andrew Marshall is senior technical partner at KPMG UK www.kpmg.co.uk