5.2 Auditor Responsibility for Non-GAAP Measures
Because non-GAAP financial information is not permitted in a registrant’s financial statements or in the notes thereto, the external auditor’s opinion does not cover it. Therefore, since such information is not subject to audit, the auditor’s responsibility with respect to it is limited. In general, when registrants include other information, such as a non-GAAP measure, in a document containing financial statements covered by the auditor’s report, professional auditing standards require the auditor to read the other information and consider whether it is materially inconsistent with the information in the audited financial statements. Auditors may also be asked by underwriters to provide “comfort” regarding the reconciliation between a non-GAAP measure and the closest GAAP measure that was presented in an offering document.
Although the external auditor’s report does not currently cover non-GAAP measures, the PCAOB’s standard-setting research agenda contains a project to explore the auditor's role regarding other information and company performance measures, including non-GAAP measures. As part of the project, the PCAOB is evaluating whether and, if so, how to change the auditor's existing performance and reporting responsibilities related to other information accompanying audited financial statements. The Board is also considering the significance to the capital markets of company performance measures that are reported in documents outside the annual report. This topic was discussed at the PCAOB’s Standing Advisory Group May 18–19, 2016, and May 24–25, 2017, meetings. See Deloitte’s June 22, 2016, and June 22, 2017, Audit & Assurance Update newsletters for more information.