Question

The PCAOB has proposed changes to the auditor's report for public companies that include requirements for the auditor to communicate "critical audit matters." Critical audit matters include those matters during the audit that involved difficult, subjective, or complex auditor judgments to that posed difficulty to the auditor in obtaining sufficient appropriate evidence or in forming the opinion on the financial statements. Similarly, the International Auditing and Assurance Standards Board (IAASB) recently revised the auditor's report in the International Standards on Auditing (ISAs) to require auditors to communicate "key audit matters." Key audit matters include communication of similar kinds of information as proposed by the PCAOB such areas of higher assessed risk of material misstatement and the effects of significant events or transactions that occured during the period.

a. Describe how users of the financial statements may benefit from communications about these matters in an audit report.

b. Describe how communication of these matters may not be beneficial to users of the finanical statements.

c. What difficulties, if any, may auditors face in communicating about these matters?

Answer 1