Today, the Board will vote on two proposed standards for expanded language in the auditor's report: one to require auditors to include a discussion of "critical audit matters" specific to the audit; and the other to require auditors to provide their evaluation of "other information" that is in a company's annual report filed with the SEC.
Communication of critical audit matters in the auditor's report is intended to make the auditor's report more informative, thus increasing its relevance and usefulness to investors and other financial statement users. The critical audit matters may provide previously unknown information about the audit that could enable investors to analyze more closely any related financial statement accounts and disclosures.
The proposed standard would retain the pass/fail model and the basic elements of the current auditor's report, but would require the auditor to communicate a wider range of information specific to the particular audit.
The proposed standard would require:
Critical audit matters are those matters the auditor addressed during the audit of the financial statements that:
Critical audit matters ordinarily are matters of such importance that they are:
Factors that the auditor should take into account in determining critical audit matters:
The description for each critical audit matter in the auditor's report would:
Under existing PCAOB standards, the auditor has a responsibility to "read and consider" other information with no related reporting requirements.
The proposed standard would: