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Memos on the SEC's recent approval of the PCAOB's expanded audit report standard continue to flow into our inbox and onto our Auditing topical page - many of them replete with suggested actions for companies to consider now in preparation for the inevitable audit and financial reporting process changes that may be triggered by the new standard.

Consider the CAM disclosure-related guidance suggested in these memos:

Wachtell: In preparation for the CAM disclosure requirements, audit committees of companies should consider, if they have not done so already, starting a dialogue with their auditors about how the new standard may impact the audit process, including its impact on the auditor’s approach in conducting its audit, the timing of audit completion and when the audit committee will be able to review any proposed disclosure of a CAM. Audit committees should consider implementing a process with their auditors for early notification of any intention to disclose a CAM and the information proposed to be included in the audit report. Companies may also choose to discuss with their auditors whether any CAMs currently exist, were the new standard to be applied.

Sullivan & Cromwell: The new auditor’s report will reflect the auditor’s perspective on CAMs, which may be inherently different from management’s or the audit committee’s perspective. Some portion of these matters are likely to arise in contexts where the company is already addressing sensitive or complex disclosure issues, but the interaction between CAMs and the company’s disclosure will be a critical consideration for management and audit committees. It is likely that, in certain cases, companies will wish to revise or supplement their own disclosure in light of the auditor’s discussion of CAMs in order to ensure that the totality of the disclosure reflects an accurate and complete picture. As such, companies and their audit committees should initiate a dialogue with their auditors now in order to better understand various implementation points, including:

• How the auditor may approach the CAM requirement in the context of their particular company;
• What matters may, in the auditors’ view, merit this designation; and
• What sort of disclosure the auditor would anticipate making in its audit report.

While the auditor can only make actual determinations on CAMs while undertaking the audit, it might be beneficial for management and audit committees to review possible CAMs with their auditors on a hypothetical basis, relative to a prior year’s audit or as part of a pre-effective date audit, discussing what might have been identified as CAMs and how the auditor might have addressed them. Those discussions could lead to revisions or supplements to disclosures in light of those potential CAMs. Issuers should also expect that underwriters will begin to discuss CAMs with issuers and their auditors as part of their due diligence procedures.