In June 2017 the Public Company Accounting Oversight Board (PCAOB) revised Auditing Standard (AS) 3101, The Auditor's Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion, which, together with related amendments, was approved by the SEC on October 23, 2017. This standard introduced the first significant changes to auditor reporting in decades.
AS 3101 requires the auditor’s report to include information about auditor tenure and a statement that the auditor is required to be independent. Also, the standard includes some changes to the format of and verbiage used in the standard auditor’s report. These provisions of AS 3101 were effective for audits of fiscal years ending on or after December 15, 2017.
More noteworthy, the standard also requires auditors to communicate critical audit matters (CAMs) in their reports on audits of financial statements. This new requirement will have substantial ramifications for auditors and the companies they audit. As a result, audit committees are asking important questions about CAMs and the process for determining and disclosing them in the auditor’s report.