A Closer Look: Comparing the New Auditor Reporting Standards

AICPA Auditor Reporting Standards Issued

The recent issuance of the AICPA’s suite of new auditor reporting standards marks the culmination of auditor reporting standards projects for the three major standard setters (AICPA, PCAOB, and IAASB). The new auditor reporting standards will result in significant changes to the auditor’s reporting model. Much of the information communicated will be the same. It will be presented in a new, more user friendly format, intended to enhance the relevance and usefulness of the auditor’s report and to provide financial statement users with more meaningful information about the audit. For the first time ever we will see CAMs and auditor tenure presented in PCAOB audit reports, and in some instances, KAMs in AICPA and IAASB auditor’s reports. To the relief of many in public accounting in the U.S., the AICPA did not include requirements to report KAMs in all audit reports. While there are differences, the similarities of the standards across standard setters will provide consistency and enhance understandability. This edition of A Closer Look examines the requirements of the new reporting standards, including the significant changes from extant standards, how the three sets of reporting standards are similar, and how they differ.


The Auditing Standards Board (ASB) of the American Institute of Certified Public Accountants (AICPA) issued Statement on Auditing Standards No. 134, Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements (SAS 134) with one of the objectives being to converge its reporting standards with those of the International Auditing and Assurance Standards Board (IAASB). The provisions of SAS 134 are effective for audits of financial statements for periods ending on or after December 15, 2020, with early implementation not permitted. The extant AU-C Sections have been retained in the AICPA’s Auditing Standards Codification and appended with “A” (e.g., AU-C Section 700A).

The revisions to the IAASB’s International Standards on Auditing (ISAs) on reporting were issued in 2015 and became effective for audits of financial statements for periods ending on or after December 15, 2016. The ASB used the parallel ISAs as the base when developing its standards.  Those parallel ISAs include:

  • ISA 700 (Revised), Forming an Opinion and Reporting on Financial Statements;
  • ISA 701, Communicating Key Audit Matters in the Independent Auditor’s Report;
  • ISA 705 (Revised), Modifications to the Opinion in the Independent Auditor’s Report; and
  • ISA 706 (Revised), Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor’s Report.

As is its practice, the ASB made changes to the language of the ISAs to include terms or phrases that are more commonly used in the United States. We’ll take a closer look at some of differences between the standards here. The ASB has stated that it believes that such changes will not create substantive differences in application between the ISAs and AICPA’s Auditing Standards Codification.


The Public Company Accounting Oversight Board (PCAOB) issued its new auditor reporting standards on June 1, 2017. Titled AS 3101: The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion, AS 3105: Departures from Unqualified Opinions and Other Reporting Circumstances, and AS 3110: Dating of the Independent Auditor’s Report (hereinafter referred to as the PCAOB standards), these new standards and their related amendments to existing auditing standards became effective in phases:

  • Phase 1—Provisions other than those related to Critical Audit Matters (CAMs) were effective for audits of fiscal years ending on or after December 15, 2017.
  • Phase 2—Provisions related to CAMs are effective for (1) audits of fiscal years ending on or after June 30, 2019 for large accelerated filers, and (2) audits of fiscal years ending on or after December 15, 2020 for all other companies to which the requirements apply. (Note: Communication of CAMs is not required for audits of certain exempted entities.)

Similarities and Differences

The PCAOB standards are similar in many respects to the IAASB’s new standards that were used as a base for the standards issued by the AICPA. For example, all three sets of standards require the “Opinion” section to be presented first in the auditor’s report, followed by the “Basis for Opinion” section. All require a more explicit reference to independence in the “Basis for Opinion” section.

There are also some notable differences between the three sets of standards. For example, the AICPA and IAASB require a more extensive description of the responsibilities of management and of the auditor for the preparation and audit of the financial statements, respectively. The AICPA standard specifically “scopes out” audits of Employee Benefit Plans (EBP) subject to ERISA. At the time of this writing, a proposed SAS, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA, providing guidance for EBP audits is expected to be issued in the immediate future.

In this edition of A Closer Look, we’ll focus on the new AU-C 700 Sections of the AICPA Auditing Standards Codification and their equivalents from the IAASB and PCAOB.


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CCH ARM Editorial

CCH ARM Editorial

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