Post-Implementation Review of AS 3101, The Auditor's Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion
Adopted by the PCAOB in June 2017, the requirement for auditors to report critical audit matters (CAMs) represented the most significant change to the auditor's report in over 70 years.
The PCAOB is committed to fully understanding the impact of CAM requirements on audit firms, preparers, audit committees, investors, and other financial statement users.
Interim Analysis of CAM Requirements
The PCAOB has released two interim analysis reports examining the initial impact of the CAM requirements.
- Interim Analysis Report: Further Evidence on the Initial Impact of Critical Audit Matter Requirements (December 2022)
- Interim Analysis Report: Evidence on the Initial Impact of Critical Audit Matter Requirements (October 2020)
The reports are accompanied by staff white papers providing technical detail and additional information related to the methodologies by which the PCAOB gained information to support the findings in the interim analysis reports – including stakeholder outreach and large-sample statistical analysis. Links to the White Papers are available here:
- Staff White Paper: Second Stakeholder Outreach on the Initial Implementation of CAM Requirements (December 2022)
- Staff White Paper: Second Econometric Analysis on the Initial Implementation of CAM Requirements (December 2022)
- Staff White Paper: Stakeholder Outreach on the Initial Implementation of CAM Requirements (October 2020)
- Staff White Paper: Econometric Analysis on the Initial Implementation of CAM Requirements (October 2020)
Key findings from the staff's analyses include the following:
- The average number of CAMs per audit report has declined over time, and the proportion of audit reports that communicate a single CAM has increased.
- Investor awareness and use of CAMs continues to develop.
- The staff has not found evidence of significant unintended consequences from auditors’ implementation of the CAM requirements.
The Board reminds auditors that they must communicate in their audit reports all matters relating to the audit of the current period’s financial statements which meet the definition of a critical audit matter under AS 3101. As stated in AS 3101, it is expected that, in most audits, the auditor would determine that at least one matter involved especially challenging, subjective, or complex auditor judgment. Today’s challenging and rapidly changing macroeconomic environment (e.g., the COVID pandemic, inflation, geopolitical instability) might cause some audit areas to become increasingly challenging, subjective, or complex, which in turn may result in the communication of additional CAMs. In communicating CAMs, auditors are reminded that the intent of CAMs is to provide information about the audit that will be useful to investors and that auditors should therefore provide audit-specific information. The PCAOB will explore opportunities to further increase investor familiarity with CAMs so that investors are able to make use of the information available within CAM communications.
Further information on implementation of the CAM requirements is available in the Standards section of this website.
Because some of the effects of the CAM requirements may take several years to fully manifest or stabilize, the next analysis will be published no earlier than 2024. Future analyses will further evaluate the benefits and costs of the CAM requirements, including any unintended consequences, to understand the overall effect of the requirements on users of financial statements, auditors, and public companies.