The Public Company Accounting Oversight Board has approved a new standard (though still subject to SEC approval) designed to enhance the relevance and usefulness of the Auditor's Report with additional information for investors.
The new standard and related amendments require auditors to include in the auditor's report a discussion of the critical audit matters (CAMs), which are matters that have been communicated to the audit committee, are related to accounts or disclosures that are material to the financial statements, and involved especially challenging, subjective, or complex auditor judgment. Under the new standard, the auditor's report will disclose, among other things, the tenure of an auditor, specifically, the year in which the auditor began serving consecutively as the company's auditor. It also will include the phrase, "whether due to error or fraud," in describing the auditor's responsibility under PCAOB standards to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements.
If approved by the SEC, the new auditor's report format, tenure, and other information would be effective for audits for fiscal years ending on or after December 15, 2017. The communication of CAMs for audits of large accelerated filers would be effective for audits for fiscal years ending on or after June 30, 2019 and the communication of CAMs for audits of all other companies would be effective for audits for fiscal years ending on or after December 15, 2020.
Communication of CAMs is not required for audits of emerging growth companies, brokers and dealers, investment companies other than business development companies, and employee stock purchase, savings and similar plans.
A fact sheet on the new rules also is available: https://pcaobus.org/News/Releases/Pages/fact-sheet-auditors-report-standard-adoption-6-1-17.aspx
