The Public Company Accounting Oversight Board (PCAOB) recently released an interim analysis report on the initial impact of critical audit matter (CAM) requirements (Auditing Standard No. 3101). Generally, CAM requirements are meant to identify audit matters that required especially challenging, subjective, or complex auditor judgment and to describe how the auditor responded to those matters. For large accelerated filers, the CAM requirements have applied to audits for fiscal years ending on or after June 30, 2019, and for other public companies, the requirements will apply to fiscal years ending on or after December 15, 2020.
Based on stakeholder surveys, the report notes that audit firms have not passed on their significant implementation costs to issuers and that CAM matters took on average only 1% of total audit hours. Respondents agreed that CAM requirements had not “chilled” communications with auditors, and over one-third of engagement partners reported that issuers had changed financial statement disclosures or other reporting due to CAMs. Among surveyed investors, use of CAMs is still developing, with many reporting them to be useful but some indicating they are not specific enough.
The report provides some statistical detail on CAMs: