The Public Company Accounting and Oversight Board (PCOAB) adopted a new auditing standard with a goal to enhance the usefulness of the auditor’s report to investors by providing additional and important information.
The US Securities and Exchange Commission (SEC) approved the regulation as well. The new standard would require auditors to include in the auditor’s report a discussion of the the critical audit matters (CAMs). CAMs 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 challenging, subjective or complex auditor judgment.
CAMs will have to be added to the audit reports of large companies beginning in mid- 2019 and for other companies starting in early 2021. Along with that auditor’s will also have to disclose their tenure with the company starting early next year.
It definitely seems to be in the right direction to give investors more information on not simply the quality of the financials but also the quality of the audit.