PCAOB Issues New Audit Report Requirements
The Public Company Accounting Oversight Board (PCAOB) approved a new format for audit reports of public companies, with the overall goal of providing more transparent and useful information to investors and other financial statement users. AS 3101, The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion, will begin to take effect for audits of fiscal years ending on or after December 15, 2017. Early adoption is allowed, upon final SEC approval. The following summarizes the most significant changes:
- The auditor’s report will be addressed to the company’s shareholders and board of directors, with additional addressees permitted.
- The auditor’s opinion will now appear in the first section of the auditor’s report.
- The report will disclose the year in which the auditor began serving consecutively as the company’s auditor, as well as a statement that the auditor is required to be independent.
- Certain standardized report language will change to clarify the auditor’s responsibilities.
Also, an entirely new section of the auditor’s report entitled “critical audit matters” will provide information about the most challenging, subjective, or complex aspects of the audit. These matters relate to accounts or disclosures that are material to the financial statements, arise from the financial statement audit, and required communication to the audit committee (e.g., significant estimates or unusual transactions). If no “critical audit matters” were identified, the auditor’s report must state that fact. This new report requirement will take effect for fiscal years ending on or after June 30, 2019 for large accelerated filers, and for fiscal years ending on or after December 15, 2020 for all other relevant filers (which will exempt brokers and dealers, investment companies other than business development companies, emerging growth companies, and employee stock purchase, savings, and similar plans).
ABOUT THE AUTHOR
Jennifer Louis has over 25 years of experience in designing and instructing high-quality training programs in a wide variety of technical and “soft-skills” topics needed for professional and organization success. In 2003, she founded Emergent Solutions Group, LLC, where she focuses her energy on designing and delivering practical and engaging accounting and auditing training. Jennifer started her career in Audit for Deloitte & Touche LLP. Jennifer graduated summa cum laude from Marymount University with a B.B.A. in Accounting