The US Public Company Accounting Oversight Board (PCAOB) has adopted a new auditing standard, The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion. The new standard requires the auditor's report to include additional important information to investors and is subject to approval by the US Securities and Exchange Commission (SEC).
The new standard requires the auditor’s report to:
- Discuss critical audit matters (CAMs), which are matters that have been communicated to the audit committee, are related to accounts or disclosures that are material to the financial statements, and involve particularly challenging, subjective, or complex auditor judgment
- Disclose the year in which the auditor began serving consecutively as the entity’s auditor
- Include the phrase, ‘whether due to error or fraud’, in the description of the auditor's responsibility under PCAOB standards to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements.
The standard retains the pass/fail model of the existing auditor's report.
The new standard does not require communication of CAMs for audits of emerging growth companies; brokers and dealers; investment companies other than business development companies; and employee stock purchase, savings, and similar plans.
The PCAOB has set phased-in effective dates, subject to SEC approval, as follows:
- New auditor's report format, tenure, and other information: audits for fiscal years ending on or after 15 December 2017
- Communication of CAMs for audits of large accelerated filers: audits for fiscal years ending on or after 30 June 2019
- Communication of CAMs for audits of all other companies: audits for fiscal years ending on or after 15 December 2020.
The new standard is available on this link.
© 2017 CCH Incorporated and/or its affiliates. All rights reserved.