As auditors work to implement the most significant changes to the auditor's report in 70 years, the PCAOB is providing staff guidance based on discussions with practitioners who performed "dry run" simulations using the new reporting standards.
The PCAOB issued three staff guidance documents in support of auditors who are implementing Auditing Standard No. 3101, The Auditor's Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion. The new standard requires auditors to disclose "critical audit matters" that arise from the financial statement audit and relate to accounts that are material to the financial statements.
These are matters that are communicated or required to be communicated to the audit committee and involve especially challenging, subjective, or complex auditor judgment. The staff guidance consists of:
- A high-level overview of critical audit matter requirements (available at pcaobus.org);
- Thematic observations that arose from the Office of the Chief Auditor's review of audit firms' critical audit matter methodologies (available at pcaobus.org); and
- A deeper dive on the determination of critical audit matters (available at pcaobus.org).
Critical audit matter implementation takes effect for audits of large accelerated filers for fiscal years ending on or after June 30, 2019. The new rules take effect for audits of all other companies to which the requirements apply for fiscal years ending on or after Dec. 15, 2020.