Council of Institutional Investors
​Council Asks PCAOB to Broaden Definition of Critical Audit Matters
7/28/2016
Rosemary Lally
Thursday, July 28, 2016
by: Rosemary Lally

Section: CII Governance Alert




CII sent a letter to the Public Company Accounting Oversight Board (PCAOB) July 27 commenting on the board’s proposed auditing standard entitled “The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion and Related Amendments to PCAOB Standards.”

In its correspondence, the Council expressed the following views on the standard:
  • The definition of “critical audit matters” required to be discussed by the independent auditor in the auditor’s report should be broadened beyond any matter that “relates to accounts or disclosures that material to the financial statements.”
  • An independence statement and information about auditor tenure should be included in the auditor’s report.
  • The addressees of the auditor’s report should be limited to the shareowners of corporations or equivalents for companies not organized as corporations.
The project to improve the auditor’s reporting model began in 2010 with PCAOB staff outreach to various stakeholders, including investors, financial statement preparers and auditors. In 2011, the board issued a concept release and then held a public roundtable to seek public comment on potential changes to the model. In August 2013, the board proposed the auditor reporting standard along with another new standard on the auditor’s responsibilities for other information outside the financial statements. This reproposal is an effort to get comments on the changes that the board adopted to the standards following the 2013 proposal. 
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