[The following paragraph was effective for audits of financial statements for periods beginning on or after June 15, 2003. It was amended, effective for audits of fiscal years beginning on or after December 15, 2012. See PCAOB Release No. 2012-004.

Return to the current version.]


Section 380, Communication With Audit Committees, requires auditors to determine that certain matters related to the conduct of an audit are communicated to audit committees. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ markedly from management's current judgments. The auditor should determine that the audit committee is informed about the process used by management in formulating particularly sensitive accounting estimates, including fair value estimates, and about the basis for the auditor's conclusions regarding the reasonableness of those estimates. For example, the auditor considers communicating the nature of significant assumptions used in fair value measurements, the degree of subjectivity involved in the development of the assumptions, and the relative materiality of the items being measured at fair value to the financial statements as a whole. The auditor considers the guidance contained in section 380 when determining the nature and form of communication.