Critical Audit Matters

What you need to know about the new Auditor Reporting Model

The Public Company Accounting Oversight Board adopted a new auditor reporting standard in June 2017 that will make the auditor's report more relevant to investors by requiring more information about the audit. This new PCAOB auditing standard, AS 3101, represents the most meaningful change to the auditor’s report since the 1940s.

The standard includes the communication of critical audit matters (CAMs), which will inform investors and other financial statement users of matters arising from the audit that required especially challenging, subjective, or complex auditor judgment, and how the auditor responded to those matters. These requirements are effective for annual periods ending on or after 30 June 2019 for large accelerated filers and 15 December 2020 for all other filers.

When will CAMs go into effect?

  • The requirement to communicate Critical Audit Matters in the auditors' report is effective for audits of large accelerated filers for years ending on or after June 30, 2019. 
  • For all other filers for which the CAM requirements are applicable, it is effective for fiscal years ending on or after December 15, 2020. 

What are Items that will be communicated for each CAM? 

For each CAM communicated, the auditor will:

  • identify the Critical Audit Matter;
  • describe the principal considerations that led the auditor to determine that the matter is a CAM;
  • describe how the auditor addressed the CAM in the audit; and
  • refer to the relevant financial statement accounts or disclosures that relate to the CAM.

What you need to know about the new Auditor Reporting Model

Updated Auditor's Report


Episode 60 of "Profession in Focus" features Jackie Daylor, National Managing Partner - Audit Quality & Professional Practice at KPMG in the U.S. Daylor discusses the updated auditor's report, critical audit matters, and the keys to success for audit committees and others as they contend with a new approach to auditor reporting.

The new Critical Audit Matters is a great opportunity for the audit profession and the biggest change we've had in the last 70 years -so we view it as an opportunity for better communication with investors.
Jackie Day/or, KPMG, National Managing Partner -Audit Quality & Professional Practice