A Postimplementation Analysis of AS 3101

Examples of Critical Audit Matters from the Big Four

Brent Lao, PhD, and Tina Wang, PhD

In 2017, the PCAOB adopted a new auditor reporting standard: AS 3101, The Auditor's Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion. The standard aims to improve the relevance of the auditor report by requiring auditors to identify and address critical auditor matters (CAM) that arise from the current period's audit of financial statements. The new standard has received wide support from the investor and analyst communities and is generally supported by large accounting firms. Some observers consider it the most meaningful and significant change to the auditor's report since the 1940s, when the Revision in Short-Form Accountant's Report or Certificate was adopted by the American Institute of Accountants. Auditors are required to report CAMs for audits of large accelerated filers whose fiscal year ends on or after June 30, 2019; for audits of all other applicable entities (i.e., other accelerated filers and smaller reporting companies), the effective date is December 15, 2020.