Updated guidance highlights key changes in the auditor’s report

By Ken Tysiac

Updated staff guidance issued by the PCAOB provides practitioners with information on Auditing Standard 3101, The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion.

The updates build on previous guidance that was issued on Dec. 28, 2017. Issues addressed in the update include:

  • New information in the annotated example of an auditor’s report on voluntary disclosure about certain audit participants in the audit.
  • A footnote on determining auditor tenure for employee benefit plans.
  • Examples of company filings that could be used to determine auditor tenure.
  • Guidance regarding uncertainty about the specific year for auditor tenure.
  • Guidance on auditor tenure reporting by predecessor auditors.
  • Guidance on reporting when audits of internal control over financial reporting are required by other regulators.
  • Guidance on reporting auditor tenure in a separate auditor’s report on internal control over financial reporting.
  • Guidance on the location of explanatory paragraphs in the auditor’s report.
  • Examples of what might be included in emphasis paragraphs.
  • Information on the voluntary disclosure of the engagement partner and other accounting firms participating in the audit.
  • Guidance on auditor reporting on supplemental information, interim financial information, and special reports.

The new auditor’s reporting standard is designed to increase the relevance and usefulness of information that auditors provide to investors and other financial statement users. All the changes in the new standard, except those related to critical audit matters, take effect for audits of fiscal years ending on or after Dec. 15, 2017.

Auditor communication of critical audit matters will be required for audits of fiscal years ending on or after June 30, 2019, for audits of large accelerated filers or Dec. 15, 2020, for audits of all other companies affected by the requirements.

Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA’s editorial director.

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