New Standards for Public Company Audit Disclosure
On June 1, 2017, the Public Company Accounting Oversight Board (PCAOB) voted to adopt new standards for public company audit reports. The new auditing standard, AS 3101, is the result of nearly eight years of work by the PCAOB with members of the public accounting profession, regulators, academics, and investor groups. If approved by the Securities and Exchange Commission, this new standard will change the scope of the current auditor’s report. AS 3101 retains the unqualified versus qualified (pass versus fail) opinion of the existing auditor's report, but makes significant changes to the auditor's report by adding a new section highlighting what the PCAOB calls “critical audit matters” (CAM). Adding CAM to audit opinions is intended to better highlight key areas of risk information to reduce the information asymmetry between users of a company’s financial statement and the company's management.