Question

What does it mean if a company's 10-k has no critical audit matter section?

Answer 1

The implementation of PCAOB Auditing Standard 3101 (AS 3101): The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion, adopted on June 1, 2017, makes significant changes to the auditor’s opinion. Among the new requirements is the disclosure of critical audit matters (CAMs), which took effect for audits of large accelerated filers for fiscal years ending on or after June 30, 2019, and on or after December 15, 2020, for all other required companies.²

As defined by the PCOAB, a critical audit matter is any matter arising from the audit of the financial statements that was communicated, or required to be communicated, to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and;
(2) involved especially challenging, subjective, or complex auditor judgment.

For each critical audit matter communicated in the auditor’s report the auditor must:

• Identify the critical audit matter;
• Describe the principal considerations that led the auditor to determine that the matter is a critical audit matter;
• Describe how the critical audit matter was addressed in the audit; and
• Refer to the relevant financial statement accounts or disclosures that relate to the critical audit matter.

Critical Policy Critical Accounting Policy Audit Matter Revenue Recognition Impairment of Investment Securities Goodwill Research and Development Costs Contingencies Income Taxes Inventories