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Remarks before the 2020 AICPA Conference on Current SEC and PCAOB Developments

Jeffery Joseph
Professional Accounting Fellow, Office of the Chief Accountant

Washington D.C.

Dec. 7, 2020

The Securities and Exchange Commission disclaims responsibility for any private publication or statement of any SEC employee or Commissioner. This speech expresses the author's views and does not necessarily reflect those of the Commission, the Commissioners, or other members of the staff.


Good afternoon and thank you for the opportunity to speak to you today.

Today, I would like to share with you recent observations related to the implementation and post-issuance period of the Auditor’s Reporting Model (“ARM”) in PCAOB AS 3101,[1] specifically with regard to the communication of critical audit matters (“CAMs”). Then, I would like to highlight the interim analysis report recently issued by the PCAOB on the initial impact of CAM requirements.[2]

Critical Audit Matters

Members of the SEC’s Office of the Chief Accountant (“OCA”) staff have previously remarked that stakeholders within the financial reporting system have an important role to play in the implementation of a new auditing standard.[3] It is during a standard’s post-issuance period that everyone should remain engaged and appropriately responsive to facilitate stakeholders in their efforts, and to further the standard towards achieving its stated objective.[4]

Recognizing the need to remain engaged, the OCA staff has continued to focus on the implementation, and post-implementation for those that have adopted, of ARM, including the communication of CAMs.

CAM Implementation – Current State

Pursuant to AS 3101, an auditor must determine whether there are any CAMs in the audit of an entity’s financial statements. Through CAMs, the auditor’s report conveys audit-specific information on matters that required especially challenging, subjective, or complex auditor judgment related to accounts or disclosures that are material to the financial statements. These communications are intended to make the auditor’s report more informative.[5]

I would like to thank those auditors who participated in the initial implementation of CAMs, or phase one, as well as those stakeholders who worked collaboratively with their auditors during phase one, including management and audit committees. I would also like to thank those auditors and stakeholders who continue to work through implementation as we enter the second phase. In addition, I would like to acknowledge the PCAOB for continuing to provide resources and tools for implementation,[6] as well as insights on the initial impact of CAMs on key stakeholders in the financial reporting process.[7] These efforts provide a great example of what can be achieved when all parties work together in a proactive way to provide high-quality financial information to investors.

CAM Implementation – Observations from Phase One

I will provide some initial OCA staff observations about CAMs communicated within audit reports where CAMS have been implemented.

CAMs – Boilerplate Language versus Audit Specific Language

My first observation centers on the specificity of language used in communicating CAMs in the auditor’s report. Specifically, I am referring to instances where the language contained within the CAM is tailored to the audit of a specific entity versus language that is “boilerplate” in nature. We applaud instances where the auditor’s report utilizes entity-specific information and believe such language provides useful information to the users of the financial statements. For example, we have observed instances where the wording of the CAM describes the specific input and/or assumption driving a principal consideration, which we believe are useful when evaluating the judgements made in an audit.

PCAOB – Interim Post-Implementation Review

As requested in the Statement on SEC Approval of the PCAOB’s New Auditor’s Reporting Standard,[8] the PCAOB staff undertook an interim post-implementation review to evaluate the initial impact from the implementation of CAMs. The PCAOB staff completed their review and, in October 2020, released an interim analysis report and two corresponding white-papers.[9] We commend the PCAOB on performing their interim post-implementation review in a timely manner.

In addition, we note the PCAOB’s interim analysis report was based on extensive outreach to audit firms, engagement partners, investors, audit committee chairs, and preparers. By seeking feedback from a wide range of stakeholders, the PCAOB continues to demonstrate their commitment to furthering their goal of active stakeholder engagement.

We encourage stakeholders to read the PCAOB’s interim analysis report, and corresponding white-papers, to better understand the feedback received by the PCAOB regarding the initial implementation of CAMs.


Thank you for your attention and for the opportunity to speak today.

[1] See Public Company Accounting Oversight Board (“PCAOB”) Auditing Standard (“AS”) 3101: The Auditor's Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion, available at See also Order Granting Approval of Proposed Rules on the Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion, and Departures from Unqualified Opinions and Other Reporting Circumstances, and Related Amendments to Auditing Standards, Release No. 34-81916 (October 23, 2017) [82 FR 49886].

[2] See PCAOB, Interim Analysis Report: Evidence on the Initial Impact of Critical Audit Matter Requirements, available at

[3] See e.g., Louis J. Collins, Professional Accounting Fellow, Office of the Chief Accountant, U.S. Securities and Exchange Commission, Remarks before the 2019 AICPA Conference on Current SEC and PCAOB Developments (Dec. 9, 2019), available at

[4] Id.

[5] See Jay Clayton, Chairman, U.S. Securities and Exchange Commission, Statement on SEC Approval of the PCAOB’s New Auditor’s Reporting Standard (October 23, 2017), available at

[8] See supra note 5.

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