On 23 October 2017, the SEC approved a new Public Company Accounting Oversight Board (PCAOB) auditor’s reporting standard, which is aimed at offering investors more informative and well-grounded auditor’s reports with more specific information about the audit undertaken.
The PCAOB new audit standard maintains the “pass/fail” opinion of the current auditor’s report but includes the following changes:
- Critical Audit Matters (CAMs): The auditor has to expressly disclose the existence (or non-existence) of CAMs encountered in the audit, that is, any matter communicated or required to be communicated to the audit committee that relates to accounts or disclosures which are material to the financial statements, and that involves especially challenging, subjective or complex audit judgement.
- Other requirements: The audit report is required to disclose the years that the auditor has been in charge of the audit of the company, as well as to include a statement regarding the auditor’s independence. The auditor’s report has to be addressed to the shareholders and board of directors or equivalents of the company. Additionally, certain standardized language in the report has changed, and the auditor’s opinion has been moved to the first section of the report. These requirements are intended to clarify the role of the auditor and its responsibilities.
All proposed new PCAOB rules, other than those related to CAMs, will be effective for the audits of fiscal years ending on or after 15 December 2017. On the other hand, the provisions related to CAMs will be effective as follows: (i) to audits for fiscal years ending on or after 30 June 2019 for large accelerated filers and (ii) to audits for fiscal years ending on or after 15 December 2020 for all other companies to which the requirements apply.
The PCAOB rules are available at:
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