Audit Committee Guidance: Implementation of Critical Audit Matters

Inside Americas Boardrooms

In a November 2018 episode, we previewed changes to the auditor's reporting model, particularly related to critical audit matters (CAMs). In that episode, Catherine Ide, Managing Director of Professional Practice and Member Services at the Center For Audit Quality (CAQ) outlined questions that today's audit committees should ask regarding the identification and communication of CAMs in the auditor's report.

Six months later, Ide returns to ''Inside America's Boardrooms'' to provide an update based on recent publications released by the PCAOB. What do boards and audit committees need to know about CAMs?

''The overall CAM requirement itself has not changed...,'' explained Ide. ''CAMs continue to be matters that arise from the audit that are communicated...to the audit committee. They relate to accounts or disclosures that are material to the financial statements and involve especially challenging, subjective or complex auditor judgement.''

Ide overviews the recent PCAOB series; yet, she highlights the third publication as the one audit committees will likely find most helpful. In the third publication, the PCAOB takes a deeper dive on the determination of CAMs and even provides FAQs associated with their implementation.

Host TK Kerstetter asks Ide to differentiate between CAMs and critical accounting estimates. He also asks Ide about the consistency of CAM determinations from one auditor or audit to another:

We know that users of these CAMs are going to compare--either across audit firms or across industries. But I would just caution those comparisons and encourage users not to make assumptions about the CAMs themselves or how they're described. The PCAOB was quite clear that CAMs are unique to each particular audit. - Catherine Ide, Managing Director of Professional Practice and Member Services at the Center For Audit Quality (CAQ)
The CAQ has various resources available for audit committees related to CAMs and the new auditor's reporting model. Don't miss their publication: Critical Audit Matters: Lessons Learned, Questions to Consider, and an Illustrative Example or their recent Webcast on Critical Audit Matters, which brings together the perspectives of regulators, auditors, investors and audit committees to discuss CAM implementation.
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