United States

Critical audit matters: Key concepts and FAQs for audit committees

FINANCIAL REPORTING INSIGHTS  | 

The new auditor reporting standard issued by the Public Company Accounting Oversight Board will require auditors to provide additional information in their reports on audits of financial statements, including information about critical audit matters (CAM). To help audit committees understand the auditor’s responsibility to determine and communicate CAM, the Center for Audit Quality recently released a new resource, Critical Audit Matters: Key Concepts and FAQs for Audit Committees, Investors, and Other Users of Financial Statements. The resource defines a CAM, discusses the auditor’s considerations in determining whether a matter is a CAM, details language used in reporting CAMs, and answers frequently asked questions about CAMs.

The effective dates for including CAM in the auditor’s report are as follows:

  • For audits of large accelerated filers - fiscal years ending on or after June 30, 2019
  • For audits of all other companies to which CAM requirements apply - fiscal years ending on or after December 15, 2020

Before the requirement becomes effective, ongoing dialogue about CAM reporting among auditors, management and audit committees will be critical. One of the reasons early dialogue is important is that the description of CAMs in the auditor’s report may impact management’s consideration of the related information disclosed in the financial statements.