It took years to get here, but it finally arrived. The PCAOB voted on June 1st to issue a new standard that will require auditors to publish an audit report that is much more than the rubber stamp it has been for the last 70 years.
The project has been years in the making, starting in 2008. It will be phased into existence in stages. Starting in years ending after December 15, 2017 - this calendar year, essentially - public companies will have to include in their audit report the following information, from the PCAOB Fact Sheet:
Auditor tenure — The auditor's report will include a statement disclosing the year in which the auditor began serving consecutively as the company's auditor;
Independence — The auditor's report also will include a statement that the auditor is required to be independent;
Enhancements to basic elements — Certain standardized language in the auditor's report has been changed, including adding the phrase, "whether due to error or fraud," when describing the auditor's responsibility under PCAOB standards to obtain reasonable assurance about whether the financial statements are free of material misstatements;
Standardized form of the auditor's report — The opinion will appear in the first section of the auditor's report. Section titles have been added to guide the reader; and,
Addressees — The auditor's report will be addressed to the company's shareholders and board of directors or equivalents (additional addressees also are permitted).
The really interesting stuff - the critical audit matters, or CAMs - will be added later. Large accelerated filers will add CAM information to their reports in fiscal years ending on or after June 30, 2019; all other companies will comply in fiscal years ending on or after December 15, 2020.
What makes CAMs interesting? They are matters that were communicated or required to be communicated to the audit committee and relates to material accounts or disclosures in the financial statements, and involved especially challenging, subjective, or complex auditor judgment.
In short, CAMs will give investors much more insight into the conversations between auditors and audit committees - and will also give investors fresh insights into what might matter most in the financial statements in terms of accounting risk. One caveat: it’s not quite a done deal yet. The SEC still has to approve.