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Financial Reporting and Regulatory Update

First Quarter 2019

From the PCAOB

Guidance for CAM implementation

On March 18, 2019, the PCAOB released three staff guidance documents that address implementation of the new critical audit matter (CAM) requirements. These new requirements, which phase in from June 30, 2019, through Dec. 15, 2020, will require auditors to communicate CAMs in the auditor’s report under PCAOB AS 3101, “The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion.”

The three staff guidance documents cover the following:

Although the staff developed these documents primarily to offer insights for auditors, “The Basics” document also may be of interest to preparers, audit committees, and investors.

Additionally, the PCAOB created a webpage addressing implementation of the new auditor’s report. This resource provides information, available resources, and training opportunities to auditors and other stakeholders, with a particular emphasis on how auditors are preparing to identify and communicate CAMs. The PCAOB staff also will continue to monitor CAM implementation and determine if additional guidance is needed.

2019 Staff Inspections Outlook for Audit Committees

On March 14, 2019, the PCAOB posted the “2019 Staff Inspections Outlook for Audit Committees” to its website. The report includes the PCAOB’s plans to communicate with audit committees about their core activities, the key areas of focus for the 2019 inspections, and other important topics for audit committees to address with their auditors during the audit. The primary areas of focus for planned 2019 inspections include the following:

  • Technological developments
  • Audit firms’ actions to address past inspection findings
  • Audit procedures on new accounting standards
  • Audit firms’ use of audit quality indicators
  • Implementation of new auditor’s reporting model requirements
  • Audit firms’ quality control systems
  • Auditor independence