Critical Audit Matters. A Year in Review

December 3, 2020

Published: The CAQ


In 2019, auditors began communicating critical audit matters (CAMs) in their auditor’s reports. The Public Company Accounting Oversight Board (PCAOB) defines a CAM as: any matter arising from the audit of the financial statements that was communicated or required to be communicated to the audit committee, and that (1) relates to accounts or disclosures that are material to the financial statements, and (2) involved especially challenging, subjective, or complex auditor judgment. With these new PCAOB requirements, auditors now communicate in their auditor’s report information about those areas of the audit that involved especially challenging, subjective, or complex auditor judgment.

There were over 2,000 large accelerated filers for the 2019 reporting cycle. With the first phase of CAM implementation complete, all large accelerated filers have had the opportunity to issue financial statements with auditor’s reports containing CAMs. This publication presents observations from the CAQ’s analysis of the CAMs communicated in the auditor’s reports for companies broadly, as well as a deeper dive into the S&P 100, which comprises 100 public companies across multiple industry groups. Our observations demonstrate the impact the public company audit profession has had on providing investors and others more information about the audit by complying with the new requirements. The auditor’s reports we reviewed provide straightforward descriptions about those matters that involved especially challenging, subjective, or complex auditor judgment. Within the audit procedures listed in the CAM communications, auditors provided insights into the auditing of the matter that was a CAM and a description the audit procedures performed to get comfortable with the matter. The result is an increase in the total mix of information available to investors.


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