The Public Company Accounting Oversight Board (PCAOB) has released three staff guidance documents developed to support implementation of the new critical audit matter (CAM) requirements. These new requirements will require auditors to communicate CAMs in the auditor’s report under the PCAOB auditing standard, AS 3101, The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion.
PCAOB Staff Guidance on Implementing CAMs
The staff guidance documents include the following Implementation of Critical Audit Matters documents:
- “The Basics,” which provides a high level overview of the CAM requirements;
- “Staff Observations from Review of Audit Methodologies,” which includes thematic observations that arose from the PCAOB’s Chief Auditor’s review of audit firm methodologies; and
- “A Deeper Dive on the Determination of CAMs,” which includes PCAOB Staff answers to frequently asked questions for determining CAMs.
- Although the Staff developed these documents primarily to offer insights for auditors, “The Basics,” the high-level overview, may also be of interest to preparers, audit committees, and investors.
The PCAOB Staff developed these guidance documents based on discussions with auditors regarding their experiences conducting dry runs of CAMs with their audit clients, review of methodologies submitted by 10 U.S. audit firms that collectively audit approximately 85% of large accelerated filers, and other outreach efforts. The PCAOB and Staff will continue to monitor CAM implementation and determine if further guidance is needed.
The first phase of CAM implementation is effective for audits of large accelerated filers for fiscal years ending on or after June 30, 2019. The second phase, which impacts audits of all other companies to which the requirements apply, is effective for fiscal years ending on or after December 15, 2020.
The PCAOB has also set up an auditor’s report implementation page on its website. That page provides information, resources, and training to auditors and other stakeholders on the new standard, with a particular emphasis on how auditors are preparing to identify and communicate CAMs. These efforts include, but are not limited to, promoting awareness and providing direction through staff guidance, webinars, and external engagement.
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