[IMGCAP(1)]Let’s not kid ourselves. Financial statement auditing as we know it is facing a crisis of relevance in today’s capital markets.

Scrutiny since the global financial crisis has been intense. Auditing needs a BHAG—big, hairy, audacious goal—to propel it into the 21st century. Could new and bold standards recently approved by the International Auditing and Assurance Standards Board in New York City be it?

A little over three years ago, to mark CPA Australia’s 125th anniversary, we embarked on our own BHAG, a project that would bring renewed attention to the visionary leadership witnessed over the last century-plus, but which is so often absent from today’s discourse. I travelled to Beavercreek in Dayton, Ohio to meet with an extraordinary man at the center of what is undoubtedly one of mankind’s greatest achievements. I spent time with Commander Neil Armstrong.

Our discussion over lunch that June afternoon in 2011 ranged over his incredible journey and insights, his father (who worked as an auditor for the Ohio state government) and everything else in between. By the time we were done, more than three hours had passed and we had a date to record a series of what ultimately became Commander Armstrong’s definitive interviews.

The stories we shared were of an unmistakable, positive vision, a resourcefulness and a determination to make a difference. They are characteristics not confined to aeronautical engineering and rocket science, but applicable across all manner of human endeavor. Auditing, and corporate reporting more broadly, needs that kind of “giant leap” to regain relevance at the center of decision making in business and the markets.

The IAASB’s new rules for long-form auditor reporting, mirrored in both Public Company Accounting Oversight Board and U.K. Financial Reporting Council projects, reflect a subtle but profound shift for the audit profession. Auditors and the audit role will be more visible than ever before.

This visibility has been demonstrated in the U.K., where similar changes have already been implemented. Varying approaches taken by different firms and auditors have been starkly highlighted in the analyst and investor community. The more lucid U.K. auditor reports are rich in the traits seen as critical to reforms to boost audit quality, such as professional skepticism and a deep client entity knowledge. And this at a time when “traditional” reports risk descending into “boilerplate” language of questionable value to investors.

Henry Ford’s famous line, “If I had asked people what they wanted, they would have said faster horses,” is instructive when thinking about the evolution of more meaningful audit reporting. The overwhelming response to initial research on what investors want from auditor communications was “more information.” As might be expected, this chiefly meant more information about the companies being audited, including the nuances of quality in financial reporting, systems and controls.

Substantial, and not misplaced, resistance to the idea of an auditor originating information about audited companies—aside from what the companies themselves provide—has caused the proposals to evolve to essentially auditor reports solely about audits. “Key audit matters” in the IAASB’s new standards, or “critical audit matters” in the PCAOB’s project, will focus auditors on providing nuance around areas of auditor judgment in reports rather than playing the role of a guide to the financials or commentator about the company being audited, as was previously envisaged.

Auditors face significant liabilities in their core role, which are germane to not only what they might say but also how they might say it in expanded reports. Their work remains as critical as ever to effective capital markets, but is largely unseen behind standardized communications and difficult for investors to engage with. Along with the practical realities of a highly time-pressured role, this presents major challenges on the path towards greater clarity and a dialogue that resonates with the auditor’s end user.

Regardless of the various views on the merits and challenges of long-form auditor reporting, it is within this new, pared-back framework that the opportunity lies for a renewed relevance for one of the most trusted and respected professions. In a world understandably unsympathetic to “clutter” in financial statements, the risk of over-complexity and language that adds little meaning in many words is also apposite.

Overcoming these challenges to deliver on the potential of auditing’s BHAG will take every bit of ingenuity and determination that the profession—and the investor community—can muster.

Alex Malley is chief executive of CPA Australia, one of the world's largest member organizations for business, finance and accounting professionals, representing more than 150,000 members working in 121 countries

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