Auditing | The Trusted Professional | Trusted Professional

PCAOB Releases the First Edition of Its ‘Audit Focus’ Series Focusing on CAMs

GettyImages-614840826 Audit

On Nov. 13, the Public Company Accounting Oversight Board (PCAOB) introduced its new series of staff guidance titled, “Audit Focus,” according to CPA Practice Advisor.

The PCAOB explained that "Audit Focus" is a series of its staff publications offering easily digestible information to auditors, particularly those who work with smaller public companies.

The regulator noted that each edition of the guidance reiterates the applicable auditing standards and/or staff guidance, as well as provides reminders and good practices that are specific to PCAOB-registered auditors of these public firms. These reminders are all geared toward protecting investors and enhancing audit quality.

The PCAOB focused on critical audit matters (CAMs) as the first topic for the series. It highlights key reminders for auditors from the  staff guidance related to CAMs, offers the staff’s views on the common deficiencies made by auditors and shares good practices that the staff has observed.

AS 3101, The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion, defines a CAM as any matter deriving from the the financial statements  audit that was communicated or required to be communicated to the audit committee and that relates to accounts or disclosures that are material to the financial statements and involved particularly challenging, subjective or complicated auditor judgment.

The PCAOB added that it has a research project that is focused on CAMs communication. "That project seeks to understand why there continues to be a decrease in the average number of CAMs reported by audit firms of all sizes in their auditor’s reports over time and whether there is a need for additional guidance, changes to PCAOB standards, or other regulatory action to improve such reporting, including the information that is provided as part of the CAM reporting. Observations described within this Audit Focus are being considered by the CAMs research project team as they advance their analysis," the PCAOB stated.

Relatedly, according to Accounting Today, PCAOB board members George Botic and Christina Ho talked about the recent inspection findings in a panel discussion on Nov. 13 at the Financial Executives International's Current Financial Reporting Insights virtual conference.

"When you think about where our inspectors see repeated observations—deficiencies, if you will particularly in Part I.A, which are for the firms not obtaining sufficient appropriate audit evidence—things like revenue recognition, inventory, allowance for credit losses in the financial sector, areas around business combinations, allowance for allocation of purchase price, as well as long-lived assets, goodwill, intangibles and valuation, those are some of the more frequent areas," Botic noted. "ICFR certainly is one as well in the internal control space. But those areas, those themes, really haven't changed. Sometimes we'll see more of one versus another."