New requirements represent sweeping changes to the form and content of reports.
The Securities and Exchange Commission (SEC) approved a new Public Company Accounting Oversight Board (PCAOB) auditing standard on October 23 that requires sweeping changes to how public company auditors provide information within their audit reports. According to SEC Chairman Jay Clayton, this new standard is intended to make the audit process more transparent, and audit report more informative, to investors and other users of financial statement information. The new standard, PCAOB Accounting Standard No. 3101, The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion (AS 1301), implements the following changes to audit reports:
Mr. Clayton indicated that including communication of CAMs in the audit report is designed to provide investors with additional information on those matters discussed between the auditor and the audit committee—including matters that involve particularly challenging, subjective, or complex auditor judgment—thus giving investors greater insight into how the auditor reached its opinion. The redesign of the audit report format is aimed at greater readability and ease of understanding.
AS 3101 will apply to all audits conducted under PCAOB standards; however, audits of emerging growth companies, brokers and dealers, investment companies (other than business development companies), and employee stock purchase, savings and similar plans will be exempt from the CAMs disclosure requirement. The effective dates for the new requirements are as follows:
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