Alert: New PCAOB Auditor Reporting Standard

Category: Assurance

Alert: New PCAOB Auditor Reporting Standard

In June 2017, the Public Company Accounting Oversight Board (PCAOB) adopted new auditor reporting standard AS 3101 The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion. The new standard replaces portions of extant AS 3101 Reports on Audited Financial Statements and the remaining content of extant AS 3101 will be re-designated as AS 3105 Departures from Unqualified Opinions and Other Reporting Circumstances. Related amendments to other PCAOB standards have also been adopted.

The new standard was developed in response to requests from users of audited financial statements for a more informative auditor’s report that includes communication of significant matters in the financial statements and the conduct of the audit. New AS 3101 retains the existing pass/fail model of the auditor’s report and requires the auditor’s report to:

  • Discuss critical audit matters (CAMs);
  • Disclose the tenure of an auditor, specifically, the year in which the auditor commenced serving consecutively as the company’s auditor; and
  • Include additional information to clarify the auditor’s role and responsibilities.

The new auditor reporting standard applies to all audits conducted under PCAOB standards; however, communication of CAMs is not required for audits of emerging growth companies, brokers and dealers, investment companies other than business development companies and employee stock purchase, savings and similar plans. The phased effective dates are as follows, subject to approval by the Securities and Exchange Commission (SEC):

  • New auditor’s report format, tenure and other information: audits for fiscal years ending on or after December 15, 2017.
  • Communication of CAMs for audits of large accelerated filers: audits for fiscal years ending on or after June 30, 2019.
  • Communication of CAMs for audits of all other companies: audits for fiscal years ending on or after December 15, 2020.

Auditors can elect to comply before the effective date at any time following SEC approval of the final standard. To access the PCAOB press release on this matter, please click here. The new standard is available here.

This communication contains a general overview of the topic and is current as of June 12, 2017. The application of the principles addressed will depend upon the particular facts and circumstances of each individual case. Accordingly, this publication is not a substitute for professional advice and we recommend that any decisions you take about the application or not of any of the information presented be made in consultation with a qualified professional who can address any variance that may be required to reflect your circumstances. Please contact your local MNP representative for customized assistance with the application of this material. MNP LLP accepts no responsibility or liability for any loss related to any person's use of or reliance upon this material. © MNP LLP 2017. All rights reserved.

Contact a member of MNP's Financial Reporting Team

Michelle Balmer

Michelle Balmer CPA, CA

Vice President, Assurance

Michelle Balmer, CPA, CA, is a Senior Assurance Services Partner with MNP. With 14 years of experience in public practice, Michelle helps a broad range of public and privately held companies in a variety of industries. She also works on special projects, including costing studies, benchmarking and best-practice studies, operational analyses, litigation support and due diligence.

As a key member of MNP's Assurance team, Michelle has played an instrumental role in assurance policy development, implementing accounting and assurance standards firm-wide and educating assurance practitioners regarding methodologies and new pronouncements. She also provides technical advice and consultation on accounting and assurance issues, as well as on rules of professional conduct issues, to all MNP practitioners.

Michelle was certified a Chartered Accountant (CA) after obtaining a Bachelor of Commerce degree from the University of Alberta. She has been actively involved with the Institute of Chartered Accountants of Alberta, including the Chartered Accountants School of Business, in an instructional and marketing capacity. An avid volunteer, she has assisted numerous groups such as the Easter Seals of Alberta, Paralympic Sports Association and Junior Achievement of Northern Alberta.