The Impact of Group Processing on Selected Audit Disclosure Decisions

The area of accounting uncertainties seems to pose a significant problem for both accountants and auditors. Probably the most noteworthy recognition of the problems of reporting on uncertainties and attesting to such reporting appears in The Commission on Auditors' Responsibilities: Report, Conclusions, and Recommendations (CAR Report) (Commission on Auditors' Responsibilities [1978, sec. 3]). Generally, the report cites a number of lawsuits successful against auditors and proposes that auditors not be required to modify their opinions when material uncertainties or contingencies exist and are adequately disclosed in the statements. Following the CAR Report, the Auditing Standards Executive Committee (AudSEC) of the American Institute of Certified Public Accountants (AICPA) proposed and then withdrew a Statement on Auditing Standards (SAS) consistent with the CAR recommendation (AICPA [1977]). Thus, problems presented by uncertainties still remain for the auditor who must decide what constitutes "fair" disclosure of uncertainties. Discussions with members of large accounting firms indicate that they often use groups to resolve difficult reporting problems. This practice seems to be increasing due, perhaps, to concern for potential litigation, reporting complexity, and more use of specialists in auditing. The ration-