The Public Company Accounting Oversight Board (the “PCAOB”) recently issued staff guidance1 providing direction for implementing the recently adopted changes to the auditor’s report.2 The staff guidance provides, among other things, an annotated auditor’s report3 reflecting the new changes, as well as illustrative examples for the calculation of auditor tenure.
The new rules require that auditors of most public companies communicate in their audit report any critical audit matters, or CAMs, arising from the current period’s audit, or state that no CAMs exist. To be considered a CAM, the matter must have arisen from the audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex auditor judgment. For each matter that meets prong (1), the auditor must document whether or not the matter was determined to be a CAM and the basis for that determination.
The auditor report changes, other than those relating to CAMs, will become effective for audits for fiscal years ended on or after December 15, 2017, and the changes relating to the reporting of CAMs will become effective for large accelerated filers for fiscal years ending on or after June 30, 2019, and for all other filers for fiscal years ending on or after December 15, 2020.