SEC Approves New PCAOB Standard For Audit Reporting

The SEC approved a new Public Company Accounting Oversight Board ("PCAOB") auditor reporting standard that expands the scope of audit reports that must be communicated to an audit committee to include a discussion of "critical audit matters" ("CAMs"). The new standard makes significant changes to requirements for CAMs, particularly those that involve "especially challenging, subjective or complex auditor judgment," as well as disclosures for auditor tenure.

SEC Chair Jay Clayton stated that the new standard has the ability to "provide investors with meaningful incremental information," and should not lead to "frivolous litigation" and other adverse effects. Commissioner Kara Stein noted that this was the first significant change to the auditor's report in more than 70 years, and touted the potential of the change to "improve an investor's experience."