On February 27, the PCAOB announced that it would hold a two-day public meeting on April 2 and 3 to obtain further input on its proposals to expand the content of the auditor's report.
As discussed in the September 2013 Update, the PCAOB has proposed far-reaching changes to the auditor’s report. The most fundamental would be a requirement that the auditor include in its report a discussion of "critical audit matters" (CAMs). CAMs are those matters that, in the auditor’s judgment, involved the most difficult, subjective, or complex auditor judgments or posed the most difficulty to the auditor in obtaining audit evidence or forming an opinion on the financial statements. CAMs would be unique to each audit, and audit reports would therefore have to be drafted individually. The Board has also proposed to increase the auditor's responsibilities for “other information” – such as MD&A – in an annual report that contains audited financial statements. The auditor’s report would be required to include a discussion of those responsibilities and of the results of the auditor’s evaluation of the other information.
As of February 28, the PCAOB had received 237 comment letters on these proposals. As discussed in the January 2014 Update, comments submitted by audit committee members are almost uniformly critical of the proposals, particularly of CAM reporting.
The PCAOB press release announcing the public meeting states that it will consist of panels comprised of “investors and investor advocates, senior executives and audit committee chairs of major corporations, representatives from audit firms, academicians, and other interested parties.” The names of panelists have not been announced.
Comment: These proposals would make substantial changes in the relationship between auditors and public companies. Audit committee members that have not already commented on the PCAOB’s proposals should do so as soon as possible in order that their views can be taken into consideration. The PCAOB is likely to reopen the comment period in conjunction with the April public meeting. Even if it does not formally invite further comments, letters submitted while the Board is still deciding whether to adopt the proposals will almost certainly be considered.