Enhanced auditor reports on the horizon – Identifying and reporting “critical audit matters”

Description

Abstract: The auditor’s report has remained essentially the same since the 1940s, but that’s about to change under Public Company Accounting Oversight Board (PCAOB) standards. In June 2017, in the face of controversy from some auditors and issuers, the PCAOB adopted Auditing Standard 3101, Reports on Audited Financial Statements, which significantly expands auditor reporting. This article explains that, while the new standard is subject to approval by the SEC, it seems unlikely that the agency will require substantial modifications. A short sidebar highlights when disclosure of critical audit matters will not be required for audits.