Covington's "Trends in Initial Reporting of Critical Audit Matters" suggests CAM disclosure considerations for both companies and auditors based on the firm's analysis of disclosures and practices to date. In addition to identifying likely CAM triggers such as those that involve management predictions, estimates, assumptions, and valuations (e.g., tax contingencies, inventory valuations); M&A transactions; and critical accounting estimates, the memo addresses the implications of the auditor's planned CAM communications on company disclosures. More specifically, companies appear inclined and are advised to proactively prepare financial statement, MD&A and other relevant disclosure that takes into account the auditor's planned CAM communications to provide important context and other information that is unlikely to be gleaned from the CAM communication on a standalone basis.
See this Journal of Accountancy article: "How critical audit matters relate to critical accounting estimates"; these prior reports: "CAM Disclosures: Investors Speak!", "PCAOB Shares CAM Implementation Insights," "Companies: CAMs Preparation & Disclosure Implications," and "CAMs Questions From Investors: FAQs for IR Professionals"; and additional information & resources on our Audit & Audit Firms, Audit Committees, and PCAOB pages. This post first appeared in the weekly Society Alert!