Securities Regulation and Corporate Governance


Securities Regulation and Corporate Governance > Posts > SEC Requests Comments on New PCAOB Auditor Reporting Standard
SEC Requests Comments on New PCAOB Auditor Reporting Standard

On June 1, 2017, the PCAOB adopted a new auditor reporting standard—PCAOB Release No. 2017-001, The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion and Related Amendments to PCAOB Standards (the “Standard”)—that will be significant for public companies.  A copy of our prior client alert on the Standard is here.

If approved by the Securities and Exchange Commission (SEC), the Standard would require auditors to identify in their audit reports any “critical audit matters” (CAMs)—certain matters related to the audit that the auditor determines involved especially challenging, subjective, or complex auditor judgment.  The Standard would further require that the audit report describe the principal considerations that led the auditor to determine that the matter is a critical audit matter, and explain how the critical audit matter was addressed in the audit.

Today, the SEC issued a request for public comments on the proposed Standard in order to determine whether the Commission should approve the Standard.  There is only a brief comment period, with comments due by August 18, 2017.

Because there remain serious issues for public companies if the Standard is approved by the SEC, management and audit committees should consider commenting to the SEC about the issues raised by the new PCAOB standard.  Issues presented include:

  • Complying with the Standard may require auditors to disclose information about public companies that those companies themselves are not otherwise required to disclose—which may be at odds with management’s traditional role in shaping a company’s disclosures.  The SEC lacks statutory authority to turn auditors into a source of original public disclosures about an issuer.
  • Original information disclosed by auditors as a result of the Standard could be misunderstood by plaintiffs or misused to pursue meritless but costly claims.  Issuers may have to make additional disclosures in order to prevent investor confusion.
  • Identifying and disclosing CAMs will require significant additional time and expense for issuers and their audit committees, particularly during the period immediately preceding the deadline to file financial statements, during which the audit committee and senior management already face significant demands on their time.

If you have any questions or you are interested in commenting, please contact Doug Cox at (202) 887-3531 ( or Mike Scanlon at (202) 887-3668 (

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