Question

In: Accounting

Research "Auditor's Discussion and Analysis (AD&A)”. Do you think AD&A is a good idea? Explain your...

Research "Auditor's Discussion and Analysis (AD&A)”.

Do you think AD&A is a good idea? Explain your reasoning.

Solutions

Expert Solution

Regarding the Auditor’s Discussion and Analysis (AD&A), the concept release proposes that a revised auditor’s reporting model could include a supplemental narrative report, which some have described as an Auditor’s Discussion and Analysis (AD&A). An AD&A could provide investors and other financial statement users with a view of the audit and the financial statements “through the auditor’s eyes.”

Further, the concept release described that the intent of an AD&A would be to provide the auditor with the ability to discuss in a narrative format his or her views regarding significant matters. The AD&A could include information about the audit, such as audit risk identified in the audit, audit procedures and results, and auditor independence. It also could include a discussion of the auditor’s views regarding the company’s financial statements, such as management’s judgments and estimates, accounting policies and practices, and difficult or contentious issues, including “close calls.”.

Additionally, an AD&A could provide the auditor with discretion to comment on those material matters that might be in technical compliance with the applicable financial reporting framework, but in the auditor’s view, the disclosure of such matters could be enhanced to provide the investor with an improved understanding of the matters and their impact on the financial statements.

The AD&A could provide investors and other financial-statement users with a view of the audit and corporate financials “through the auditor's eyes,” according to a briefing paper for the roundtable. ... Such information could be released to investors in a more timely and efficient way by incorporating it in an AD&A.


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