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PCAOB Reviews a Few Early CAMs

By | December 11, 2019

The PCAOB announced it has conducted a limited review of audit reports of large accelerated filers reporting critical audit matters or CAMs.

As a starting matter, the PCAOB’s report seems to implicitly and perhaps explicitly assume that its audit standard requiring the reporting of CAMs provides “more useful and timely information.” That assumption is not backed up with any empirical data or observations.

The PCAOB apparently reviewed 12 of 189 audit reports through November 30, 2019 containing CAMs and there is no information about whether this observation set is statistically significant. The report promises that fuller analysis will follow.

The observations reported by the PCAOB are general in nature and far from startling or, perhaps to many, useful. Observations include:

  • Framework for implementing CAMs. Firms appear to have made significant investments in developing methodologies, tools, and training as well as providing targeted support for audit teams implementing the new requirements for the first time.
  • Preliminary CAM determination and drafting. Some audit teams reported beginning the process of determining and describing CAMs as early as the second or third quarter of the company’s fiscal year.
  • Ongoing CAM evaluation. Where CAM determination and drafting began early in the audit process, audit teams continued to evaluate the draft CAMs so that the final CAM determinations and CAM descriptions reflected the facts and circumstances of the current year’s audit, including changes that happened during the year.
  • Subject matter expertise. Audit teams reported that it was helpful to involve a firm’s national office as well as experts in tax, information technology, and other areas early and throughout the CAM determination and drafting process.
  • Management and audit committee involvement. Timely and robust engagement with management and the audit committee were important factors in the CAM implementation process

Contact Steve Quinlivan for more information.