PCAOB Issues Report Analyzing the Impact of Critical Audit Matters Requirements on Investors and Other Key Stakeholders

Today, the Public Company Accounting Oversight Board (PCAOB) released a second interim post-implementation review report addressing the impact of the critical audit matters (CAMs) requirements that we adopted in 2017. The report and accompanying staff white papers providing additional technical information are available at the following links:

• Interim Analysis Report: Further Evidence on the Initial Impact of Critical Audit Matter Requirements(PDF)
• Staff White Paper: Second Stakeholder Outreach on the Initial Implementation of CAM Requirements(PDF)
• Staff White Paper: Second Econometric Analysis on the Initial Implementation of CAM Requirements(PDF)

Modernizing standards is one of four key strategic goals for the PCAOB. In pursuit of this goal, the Board has set one of the most ambitious standard-setting agendas in PCAOB history. Given these efforts, the role of robust economic analysis in standard setting is more important than ever for the PCAOB. Post-implementation reviews are an important component of high-quality economic analysis that the PCAOB conducts as part of standard setting to ensure that PCAOB standards are working effectively to enhance audit quality and protect investors.

As described in the Interim Analysis Report, the PCAOB finds that the average number of CAMs per audit report has declined over time. The report also notes that investor awareness and use of CAMs continues to develop. For example, some investors indicated that they are using CAMs to identify key financial reporting risks. In addition, based on PCAOB staff analysis, evidence of significant unintended consequences from auditors’ implementation of the CAM requirements has not been identified.

The Board also reminds auditors of their obligations under the standard and of the Board's expectations given the complexities of today’s macroeconomic environment. Further, the Board emphasizes its commitment to ensuring that investors are familiar with CAMs and reminds auditors to present audit-specific information so that CAM communications are useful for investors.

The PCAOB plans to continue to monitor the implementation of CAM requirements and evaluate the timeline for developing a more comprehensive post-implementation review. Because the effects of the CAM requirements may take several years to fully manifest or stabilize, the PCAOB does not anticipate publishing the next analysis until after 2023.

More information about the PCAOB’s post-implementation review is available on our website.

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About the PCAOB

The PCAOB is a nonprofit corporation established by Congress to oversee the audits of public companies in order to protect investors and further the public interest in the preparation of informative, accurate, and independent audit reports. The PCAOB also oversees the audits of brokers and dealers registered with the Securities and Exchange Commission, including compliance reports filed pursuant to federal securities laws.