The PCAOB’s recently revised auditor reporting standard includes a requirement 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 or 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 ISAs to require auditors to communicate key audit matters. Key audit matters include communication of similar kinds of information as noted by the PCAOB such as areas of higher assessed risk of material misstatement and the effects of significant events or transactions that occurred 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
financial statements.
c. What difficulties, if any, may auditors face in communicating about these matters?
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