Tips for understanding critical audit matters
Auditors soon will be able to provide more helpful information in their audit reports by communicating “critical audit matters” in addition to the pass/fail opinion on the financial statements.
Critical audit matters are the backbone of PCAOB Auditing Standard 3101, The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion. Under the new standard, a critical audit matter that arises from the financial statement audit, is required to be communicated to the audit committee, and:
Critical audit matters are required to be included in auditors’ reports for large, accelerated filers beginning with fiscal years ending on or after June 30, 2019, and for other applicable companies for fiscal years ending on or after Dec. 15, 2020.
A new Center for Audit Quality (CAQ) report, Key Concepts and FAQs for Audit Committees, Investors, and Other Users of Financial Statements, provides information to explain critical audit matters and compare them to the key audit matters required in auditor reporting performed under the rules of the International Auditing and Assurance Standards Board. The CAQ is affiliated with the AICPA.
According to the report:
— Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is a JofA editorial director.
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