Auditors to Be Told to Focus On Biggest Risks

Regulators next week will urge auditors to exercise better judgment and increase their reliance on the work of corporate employees as the audit firms pore over the systems companies have in place to prevent fraud.

The guidance is designed to respond to complaints from businesses that new rules are too expensive and time consuming. It was described by sources familiar with the recommendations who spoke only on the condition of anonymity because the directives are not yet public.

The Public Company Accounting Oversight Board, which oversees the work of auditing firms, plans to issue policy and technical directives Monday. The Securities and Exchange Commission also will release new guidance on the issue next week. Auditors have been criticized recently by corporate executives who said the auditors are concentrating on obscure details rather than the big picture when they assess their clients' risk of financial restatement.

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