New Auditor's Report

(Updated April 17, 2020)

Overview

What Was Changed?


The new auditing standard retained the pass/fail opinion of the existing auditor's report, but made significant changes to the auditor's report, including:

  • Communication of critical audit matters—matters communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements; and (2) involved especially challenging, subjective, or complex auditor judgment.
  • Disclosure of auditor tenure—the year in which the auditor began serving consecutively as the company's auditor.
  • Other improvements to the auditor's report—a statement that the auditor is required to be independent, changes to certain standardized language in the auditor's report, and changes to the standardized form of the auditor's report.

Additional information on the new auditing standard: 

Why Did the PCAOB Adopt This Standard?


The PCAOB adopted the standard to make the auditor's report more relevant to investors and other financial statement users by requiring more information about the auditor and the audit.

The communication of critical audit matters arising from the audit is intended to inform investors and other financial statement users about matters that required especially challenging, subjective, or complex auditor judgment, and the response that the auditor had to those matters.

Disclosure of auditor tenure in the auditor's report will make this information readily accessible in a timely way for investors who find it useful.

The other improvements to the auditor's report are intended to enhance the user's understanding of the auditor's role and responsibilities related to the audit of the financial statements, make the auditor's report easier to read, and provide a consistent format. 

What Are the Effective Dates?


  • Provisions related to the disclosure of audit tenure and other improvements to the auditor's report took effect for audits for fiscal years ending on or after December 15, 2017.
  • Provisions related to critical audit matters will take effect for audits for fiscal years ending on or after June 30, 2019, for large accelerated filers; and for fiscal years ending on or after December 15, 2020, for all other companies to which the requirements apply.

How is the PCAOB Monitoring the New Standard's Implementation?

We strive to be proactive, accessible, transparent, and clear in our communications about the new standard and its implementation.  We are proactively providing information and training directly to auditors.  Our standard-setting professionals are also providing guidance and responding to specific questions via telephone or email.  We are engaging with key stakeholders to better understand their experiences and any implementation questions that may need to be addressed. 

The PCAOB is observing what audit firms are doing to implement the new requirements, placing particular emphasis on how they are preparing to identify and communicate CAMs. The staff is working to prevent and detect problems during implementation by:

  • Monitoring audit firms through communications with them.
  • Promoting compliance through inspections of audit firms. 

Resources and Tools for Implementation

Megan Zietsman, the PCAOB’s Chief Auditor, describes some of the latest resources available on CAMs ahead of the effective dates.

Webinars


Our standard-setting professionals also provide information through educational webinars.

The New Auditor's Report and Critical Audit Matters

In May 2019, the PCAOB staff hosted this webinar on implementation of the new CAM requirements. The webinar covered CAM determination, communication, and documentation requirements, as well as other considerations relevant to the CAM requirements. Download the slides from the webinar.

Overview of Changes to the Auditor's Report

The PCAOB staff held a webinar in January 2018 and provided an overview of the changes to the auditor’s report that became effective in December 2017. Download the slides from the webinar.

Additional Resources

Critical Audit Matters Spotlight

This Critical Audit Matters Spotlight focuses on observations from our inspections of these new requirements and from our outreach and data analysis activities.

Consistent with the Board’s strategic goal of providing more useful and timely information, we believe that sharing our initial observations from the experiences of the first adopters of CAM requirements could help auditors, companies, audit committees, and other stakeholders. 

The information in this CAMs Spotlight is not staff guidance; rather, it highlights timely and relevant observations for auditors and other key stakeholders.

What Will the PCAOB Evaluate in the Near Future?

Assessing Initial Implementation of CAMs

PCAOB staff will conduct an interim analysis in 2020 to gain an initial understanding of: (1) how auditors responded to the CAM requirements, (2) whether and how investors are using CAM communications, and (3) audit committee and preparer experiences.

The staff will also evaluate whether early evidence from the implementation of CAM requirements is suggestive of significant costs, benefits, or unintended consequences.

To inform the analysis, the staff is conducting surveys and targeted interviews of impacted stakeholders including auditors, preparers, audit committee members, investors, and other financial statement users. 

The staff has also issued a request for comment to collect information from stakeholders on initial experiences with CAM implementation. 

The PCAOB expects to produce a report in the fourth quarter of 2020 to communicate findings and provide stakeholders with early insights into initial CAM implementation.

Evaluating Overall Impact

After a reasonable period of time following full implementation of the standard, the PCAOB will conduct a post-implementation review to analyze the effectiveness of the new requirements.

The staff will reevaluate the costs and benefits of the new standard, including any unintended consequences, to understand the overall impact on the audit profession, public companies, and users of financial statements.

How Do I Contact the PCAOB?

Phone: (202) 591-4395   
Form: Contact Us