AAA Spark Meeting of Regions

Variation in Critical Audit Matter Mandated Reporting

• In Event: Audit Quality: Critical Audit Matters and Audit Risk Disclosures

Abstract

Over time, the audit report has become a boilerplate text with a simple pass/fail assessment. Beginning for all large public companies audited after June 30, 2019 and all other public companies audited after December 15, 2020, the SEC has mandated reporting on critical audit matters (CAM) be included with the audit report. However, the new rules do not explicitly define what must be included and what is not relevant. Our purpose in this research is to examine the additional reporting content to determine the level of uniqueness and relevance for individual companies. We analyze the variation in the information provided to understand how audit firms and public companies are preparing these reports and their usability to the stakeholders. Such information is vital to the practitioners as it can help ensure that these new reporting requirements have the greatest chance of succeeding in meeting the information needs of stakeholders. It can also inform best practices for the profession with regard to the CAM.

Authors

• J. L. Souza, Saint Joseph's University

• Sina Shokoohyar, Saint Joseph's University