By: George M. Wilson & Carol A. Stacey<\/p>\n
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On October 23, 2017, the SEC formally approved<\/u><\/a> the PCAOB\u2019s new Auditor\u2019s Reporting Standard, now AS 3101<\/u><\/a>. The final PCAOB standard was submitted to the SEC for approval on July 19 and published in the Federal Register on July 28.<\/p>\n <\/p>\n The new standard takes effect in two phases:<\/p>\n <\/p>\n The first phase adds information to and modifies the format of the auditor\u2019s report and is effective for audits of periods ending after December 15, 2017, this calendar year end<\/strong>. This change applies to all reporting companies.<\/p>\n <\/p>\n The second phase, which adds information about critical audit matters (CAMs) to the auditor\u2019s report, does not apply to EGC\u2019s, and is effective:<\/p>\n For audits of large accelerated filer for fiscal years ending on or after June 30, 2019<\/p>\n For audits of all other companies to which the requirements apply for fiscal years ending on or after December 15, 2020.<\/p>\n <\/p>\n The new Auditor\u2019s Report requirements that will be effective this year, for periods ending after December 15, 2017, include these modifications:<\/p>\n <\/p>\n <\/p>\n The second phase, with the later effective date, requires the auditor\u2019s report to discuss critical audit matters, which are defined as:<\/p>\n <\/p>\n \u201cA matter that was communicated or required to be communicated to the audit committee and that:<\/p>\n (1) relates to accounts or disclosures that are material to the financial statements and<\/p>\n (2) involved especially challenging, subjective, or complex auditor judgment.\u201d<\/p>\n <\/p>\n Chair Clayton, in a statement<\/u><\/a> about the new standard, said:<\/p>\n <\/p>\n I would be disappointed if the new audit reporting standard, which has the potential to provide investors with meaningful incremental information, instead resulted in frivolous litigation costs, defensive, lawyer-driven auditor communications, or antagonistic auditor-audit committee relationships \u2014 with Main Street investors ending up in a worse position than they were before.<\/p>\n <\/p>\n I therefore urge all involved in the implementation of the revised auditing standards, including the Commission and the PCAOB, to pay close attention to these issues going forward, including carefully reading the guidance provided in the approval order and the PCAOB\u2019s adopting release<\/p>\n <\/p>\n As a thought question, it will be interesting to see how a company\u2019s disclosures of Critical Accounting Estimates will relate to the auditor\u2019s discussion of Critical Audit Matters. More about this in our next post!<\/p>\n <\/p>\n As always, your thoughts and comments are welcome!<\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" By: George M. Wilson & Carol A. Stacey On October 23, 2017, the SEC formally approved the PCAOB\u2019s new Auditor\u2019s Reporting Standard, now AS 3101. The final PCAOB standard was submitted to the SEC for approval on July 19 and published in the Federal Register on July 28. The new standard takes effect … Continue reading The New Auditor\u2019s Report \u2013 A Done Deal with an Impact This Year!<\/span> \n