The IMA Financial Reporting Committee (FRC or Committee) issued a comment letter in response to the Public Company Accounting Oversight Board (PCAOB) Request for Comment, Interim Analysis of Critical Audit Matter Requirements. This release was pursuant to the PCAOB’S objective of gaining an initial understanding of how stakeholders have been responding to Auditing Standard 3101 regarding critical audit matters requirements (CAMs) that was adopted in 2017. Among other things, the standard requires an auditor of public companies in the US to communicate critical audit matters (CAMs), which are defined as any matter arising from an audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex auditor judgment. In the Request for Comment, part of the PCAOB’s post-implementation review, the Board seeks information regarding audit committee and preparer experiences and how investors are using CAM communications.
In its letter, the Committee reports that in its experience, the adopted CAM requirements did not significantly affect reporting entities. Its comment letter notes that issuers are not receiving questions on CAMs from investors or analysts. The Committee also states that it is pleased that the PCAOB is using a phased approach for its post-implementation review and putting off final assessment until the rule is fully phased in. As a general matter, FRC has not observed changes to the nature, timing, or extent of audit procedures as a result of CAMs. Activities relating to CAMs are significant items that were already receiving attention from auditors, management, and audit committees.