AS 3105, Departures from the Unqualified Opinions and Other Reporting Circumstances

June 2017 | Posted in Audit
Audit
AS 3105, Departures from the Unqualified Opinions and Other Reporting Circumstances

What is the Change?

The Public Company Accounting Oversight Board has recently approved a new standard that will have a significant impact on the auditor’s reports. This change will specifically affect the auditor’s report when the auditor expresses an unqualified opinion. Such changes will include:

  • The requirement for auditors to include a discussion of “critical audit matters” (CAM) communicated with the audit committee.
  • A disclosure stating the number of years the auditor has consecutively audited the company
  • A statement the auditor is required to be independent.
  • In regards to the auditor’s responsibility to obtain reasonable assurance the financial statements are free of material misstatement, the phrase, “whether due to error or fraud” must be added.
  • New section titles, with the opinion paragraph preceding first for a more standardized format.

What is the Impact of the Change?

Cindy Fornelli, Executive Director of the Center for Audit Quality (CAQ), states, “The CAQ applauds the PCAOB’s efforts to enhance the auditor’s reporting model to provide additional information to stakeholders in an increasingly complex and global business environment.” With the new enhancements to the audit report, the investors will be receiving the quality information they have been seeking to make better economical business and personal decisions. In addition, auditors will be improving the art of accounting while serving the public’s interests and honoring their trust at a higher standard.

When will the Change go into effect?

PCAOB plans to implement these changes over a long extended period of time:

  • Other than the discussion of CAM to the audit committee, the changes listed above will go into effect for audits with fiscal years ending after December 15, 2017.
  • The communication of CAMs to the audit committee for large accelerated filers will go into effect for audits with fiscal years ending on or after June 30, 2019.
  • The communication of CAMs to the audit committee for all other filers will go into effect for audits with fiscal years ending on or after December 15, 2020.

 

Hood, Daniel. “PCAOB makes major changes to auditor’s report.” Accounting Today. N.p., 1 June 2017. Web. 2 June 2017.

AS 3105, Departures from the Unqualified Opinions and Other Reporting Circumstances
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