Only 27 percent of board members at public companies are in favor of the Public Company Accounting Oversight Board’s proposed changes to the auditor’s reporting model, according to a new survey by BDO USA.

In contrast, 45 percent of the board directors polled said the proposed changes would not improve the auditor's report, while 28 percent aren't sure. 

When asked about specific components of the PCAOB proposal, 78 percent of the board members surveyed said they are in favor of the report disclosing the length of the external auditor's tenure in the report.  However, 67 percent of the board members polled indicated they are opposed to the auditor's report evaluating information beyond the financial statements for potential errors or misstatements that conflict with information obtained during the audit. A smaller majority of 52 percent is opposed to the report containing a discussion of critical audit matters that gave the auditor the most difficulty in forming its audit opinion.

The PCAOB wants to hear more feedback from the board directors. “We appreciate the views of corporate board members and hope that they will send us comment letters on the proposal,” said PCAOB spokesperson Colleen Brennan.

“Clearly, corporate board members aren’t sold on the usefulness of the PCAOB’s proposal to require external auditors to include much more detailed information in the annual auditor's report that accompanies a business's financial statements,” said Lee Graul, a partner in the Corporate Governance Practice of BDO USA, in a statement. “However, when you make changes to something that has been done the same way for more than 70 years, there is bound to be some pushback.”

In other parts of BDO’s survey of corporate board directors, 64 percent of them said they are aware of a new rule from the Securities and Exchange Commission that allows companies to disclose material information through postings on social media, but none of the survey respondents indicated that their companies have used this new channel to make disclosures and only 11 percent anticipate using social media for material disclosures in the future. 

When asked which topics they would like to spend more or less of their time on, 47 percent of the board members polled cited succession planning, while 45 percent cited studying industry competitors as areas where they would like to spend more time. Risk management (38 percent) and evaluating management performance (32 percent) were the other areas where sizable percentages of poll respondents expressed an interest in spending more time. Few of the board directors who responded to the survey expressed a desire to spend less time on any of these areas, however, with the possible exception of compliance and regulatory issues. 

Risky Business
When asked about the greatest risk facing their businesses, 69 percent of the board members surveyed cited regulatory and compliance overload. Cyber breaches (13 percent), fraud/corruption (9 percent), privacy violations (6 percent) and intellectual property misappropriation (3 percent) were cited by much smaller percentages of the directors who responded to the survey.

When asked to identify the greatest risk for fraud at their companies, 42 percent of the board directors polled cited embezzlement or similar crimes against the company. Corruption and bribery ranked next at 20 percent, earnings management at 18 percent, insider trading at 12 percent and revenue recognition at 8 percent.

A 55 percent majority of the board members polled said they have increased their company’s anti-fraud and anti-corruption resources in the past year. When asked where they have devoted the greatest proportion of those increased resources, 46 percent cited training and 35 percent cited personnel. Smaller proportions cited technology (14 percent) and the use of external consultants (5 percent).