The Public Company Accounting Oversight Board

The PCAOB has released its latest standard, the New Auditor's Report (Updated June 4, 2019). The new auditing standard retained the pass/fail opinion of the existing auditor's report, but made significant changes to the auditor's report, including:

 Communication of critical audit matters—matters communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements; and (2) involved especially challenging, subjective, or complex auditor judgment.

 Disclosure of auditor tenure—the year in which the auditor began serving consecutively as the company's auditor.

 Other improvements to the auditor's report—a statement that the auditor is required to be independent, changes to certain standardized language in the auditor's report, and changes to the standardized form of the auditor's report.

Additional information on the new auditing standard: 

 SEC Action: Release No. 34-81916  

 Auditing Standard: AS 3101: The Auditor's Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion

 Adopting Release: PCAOB Release No. 2017-001 

 Fact Sheet: Adoption of an Auditing Standard on the Auditor’s Report

Why did the PCAOB adopt this standard?

The PCAOB adopted the standard to make the auditor's report more relevant to investors and other financial statement users by requiring more information about the auditor and the audit.

The communication of critical audit matters arising from the audit is intended to inform investors and other financial statement users about matters that required especially challenging, subjective, or complex auditor judgment, and the response that the auditor had to those matters.

Disclosure of auditor tenure in the auditor's report will make this information readily accessible in a timely way for investors who find it useful.

The other improvements to the auditor's report are intended to enhance the user's understanding of the auditor's role and responsibilities related to the audit of the financial statements, make the auditor's report easier to read, and provide a consistent format. 

What are the effective dates?

 Provisions related to the disclosure of audit tenure and other improvements to the auditor's report took effect for audits for fiscal years ending on or after December 15, 2017.

 

 Provisions related to critical audit matters will take effect for audits 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 companies to which the requirements apply.