United States

Critical audit matters: Lessons learned

FINANCIAL REPORTING INSIGHTS  | 

In June 2017 the Public Company Accounting Oversight Board revised Auditing Standard 3101, The Auditor's Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion, which 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 of the importance and complexities of the CAM disclosures, public company auditing firms have begun performing dry runs of identifying, documenting and communicating CAMs in advance of the effective date for the disclosures.

The Center for Audit Quality recently issued a publication, Critical Audit Matters: Lessons Learned, Questions to Consider, and an Illustrative Example. The publication shares early observations from some of the dry runs performed with respect to the CAM requirements, together with related key questions audit committees should consider. The publication also includes an illustrative example of a CAM section of the auditor’s report that highlights the required components of communicating CAMs. 

Our white paper, Critical audit matters: Information for audit committees, also is a resource for audit committee members who have questions about CAMs and the process for determining and disclosing them in the auditor’s report.