The US Public Company Accounting Oversight Board (PCAOB) has released a new resource for audit committees and for investors about critical audit matters (CAMs). The PCAOB’s standard requires an auditor to determine CAMs using a principles-based framework.
A CAM is any matter arising from the audit of a company’s financial statements that meets all of the following criteria: ?
- A matter that was communicated or is required to be communicated to the audit committee; ?
- A matter that relates to accounts or disclosures that are material to the financial statements; and ?
- A matter that involved especially challenging, subjective, or complex auditor judgment.
CAM requirements are effective for fiscal years ending on or after 30 June 2019. For audits of all other companies to which they apply, CAM requirements are effective for fiscal years ending on or after December 15, 2020.
The new requirement for CAMs is a result of the PCAOB’s 2017 standard AS 3101, The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion, which made significant changes to the auditor’s report. The standard is intended to make the auditor’s report more informative and relevant to investors and other financial statement users by shedding light on areas of the audit requiring especially challenging, subjective, or complex auditor judgment.
For investors CAMs are intended to provide tailored information specific to the audit – from the auditor’s point of view – on matters that require especially challenging, subjective, or complex auditor judgment. Investors may find CAM information useful when considered among other information regarding a company’s financial statements.