Auditor reporting model: SEC approves changes affecting all PCAOB audit reports

Video , PwC US Oct 24, 2017

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Listen to PwC's US chief auditor Len Combs provide an update on the PCAOB's new standard enhancing auditor reporting.


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Hi, I’m Len Combs, PwC's US Chief Auditor.

On October 23, the SEC approved the PCAOB's new auditor reporting model after considering comments received in 50 comment letters from a range of stakeholders.

Investors who commented continue to be very supportive of the PCAOB's new reporting model, including the requirements for communication of additional information about the audit in the form of critical audit matters or CAMs. On the other hand, management, law firms and others raised concerns about the potential for the disclosure of original information about the company and the related unintended consequences that could arise as a result of communication of CAMs.

Accounting firms were generally supportive of the new standard, but did raise a number of concerns. For example, in our letter, we supported approval but reiterated our concerns about the placement of the new disclosure on auditor tenure and the potential unintended consequences of CAM reporting. We also made certain recommendations to facilitate implementation, including stressing the importance of a monitoring feedback loop that includes all stakeholders to facilitate successful implementation.

In the SEC's order approving the new standard, the Commission acknowledged communicating CAMs will be a significant change in practice for auditors, companies and audit committees. The SEC called on the PCAOB to take steps to closely monitor the implementation of the new standard, including during each step of the phased implementation.

As a result of the SEC's approval, all of the new provisions in Phase 1 will be effective for 2017 calendar year-end audits. These changes include: disclosure of auditor tenure, changes to clarify the auditor's role and responsibilities, and changes to standardize the form of the report, making it easier to read. Under Phase 2, communication of CAMs are required for audits of large accelerated filers of audit periods ending on or after June 30, 2019 and for 2020 calendar year-end audits of certain other filers.

We are well underway with our firm's implementation efforts that will include discussions with management and audit committees in advance of the required implementation date.  We intend for this approach to avoid surprises with management and audit committees at the time CAMs are communicated in any audit reports.

These efforts will help us to develop an appropriate approach that is well integrated in our audit process and responsive to the new requirements.

As we proceed with our implementation efforts, we are committed to continuing our dialogue with you.

For more information regarding the nature of upcoming changes, you can refer to our In Depth publication available on or speak with your PwC professional.

Contact us

Heather Horn
US Strategic Thought Leader, National Professional Services Group, PwC US

David Schmid
IFRS & US Standard Setting Leader, National Professional Services Group, PwC US

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