In a unanimous decision, the Public Company Accounting Oversight Board (“PCAOB”) has approved a rule to expand auditor reports in a Securities and Exchange Commission (“SEC”) filing. Announced on June 1, the new format will make filed auditor reports more valuable to investors.
The rule requires a public company’s external auditor to disclose any critical audit matters that arise while auditing their clients, and provide details on clients’ financial reporting procedures. Such requirements are listed under 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 expanded auditor’s report will be effective for audits of fiscal years concluding on or following December 15, 2017. Further, auditors must begin disclosing critical audit matters of public companies with market value over $700 million for audits in fiscal years concluding on or following June 30, 2019. For companies under the $700 million threshold, the expanded report will be effective December 15, 2020. Audits of emerging growth companies with less than $1 billion in revenue are exempt from the requirements.