The CAQ's newly-released "Critical Audit Matters: Lessons Learned, Questions to Consider, and an Illustrative Example" shares observations from auditors' practice runs on identifying & disclosing - and engaging with companies on - critical audit matters (CAMs), as will soon be required by the PCAOB's new expanded auditor report standard.
Early lessons learned generally point to building sufficient time in the process to accommodate evolving communications about likely CAM areas among the auditors, management and the audit committee, and allow management sufficient time to assess whether the company's planned disclosures will need to be modified accordingly.
In addition to illustrating by example a CAM section of the auditor's report, the publication suggests ten good questions (each of which is accompanied by relevant commentary) for audit committees - including how CAMs relate to management's critical accounting estimates, auditor-identified significant risks, and ICFR "significant deficiencies," and the auditor's CAM disclosure drafting process - to enhance their understanding of the CAMs requirements on the audit, and their interactions with auditors, management and investors.
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See also the CAQ's release; this Journal of Accountancy article; our prior report: "Expanded Auditor Report Standard: Managing CAMs Disclosure"; and additional resources on our Auditing page. This post first appeared in last week's Society Alert!
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