New July 11, 2019, PCAOB CAM Guidance For Audit Committees – Is A Matter A CAM (See Chart); And Responses To FAQs

On July 11, 2019, the PCAOB published additional guidance for audit committees about CAMs (Critical Audit Matters). I have provided a link below to the additional guidance. From the additional guidance, I am also providing immediately below a snapshot to the PCAOB’s chart to help determine whether a matter is a CAM, plus four of the PCAOB’s responses to frequently asked questions that I found interesting. This is my fourth relatively recent post in which I have commented about CAMs.

Immediately below is a snapshot to the PCAOB’s chart to determine whether a matter is a CAM:

The following are snapshots of four of the PCAOB’s responses to frequently asked questions that I found to be interesting. While the responses are useful and helpful, I don’t find that they simplify the matter. The response in the first snapshot below also could be confusing – I expect that audit committees will want to have a significant role in, or at least significant input in or comments about, CAMs and certain specific CAMs and proposed CAMs in particular. Whereas the auditor might have ultimate say about how a CAM is worded (because it is the auditor’s report), I expect that audit committees will be directly involved in and vocal about whether or not a matter is a CAM, and how the CAM is communicated. And I expect that in some circumstances there might be or will be disagreement, at which point the audit committee, or the board, or the company might be put the position of having to evaluate whether to communicate or respond further about the CAM, and the manner of doing so.

The following are snapshots of four of the PCAOB’s responses to frequently asked questions that I found to be interesting:

Click on the following link to be taken to the PCAOB’s page with the new July 11, 2019, PCAOB guidance for audit committees about CAMs:

https://pcaobus.org/Documents/Audit-Committee-Resource-CAMs.pdf

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Remember, every case and situation is different. It is important to obtain and evaluate all of the evidence that is available, and to apply that evidence to the applicable standards and laws. You do need to consult with an attorney and other professionals about your particular situation. This post is not a solicitation for legal or other services inside of or outside of California, and, of course, this post only is a summary of information that changes from time to time, and does not apply to any particular situation or to your specific situation. So . . . you cannot rely on this post for your situation or as legal or other professional advice or representation.

Thank you for reading this website. I ask that you also pass it along to other people who would be interested as it is through collaboration that great things and success occur more quickly.

Best to you, David Tate, Esq. (and inactive California CPA) – practicing in California only.

I am also the new Chair of the Business Law Section of the Bar Association of San Francisco.

Blogs: Trust, estate/probate, power of attorney, conservatorship, elder and dependent adult abuse, nursing home and care, disability, discrimination, personal injury, responsibilities and rights, and other related litigation, and contentious administrations http://californiaestatetrust.com; Business, D&O, board, director, audit committee, shareholder, founder, owner, and investor litigation, governance, responsibilities and rights, compliance, investigations, and risk management  http://auditcommitteeupdate.com

The following are copies of the tables of contents of three of the more formal materials that I have written over the years about accounting/auditing, audit committees, and related legal topics – Accounting and Its Legal Implications was my first formal effort, which resulted in a published book that had more of an accounting and auditing focus; Chapter 5A, Audit Committee Functions and Responsibilities, for the California Continuing Education of the Bar has a more legal focus; and the most recent Tate’s Excellent Audit Committee Guide (February 2017) also has a more legal focus:

Accounting and Its Legal Implications

Chapter 5A, Audit Committee Functions and Responsibilities, CEB Advising and Defending Corporate Directors and Officers

Tate’s Excellent Audit Committee Guide

The following are other summary materials that you might find useful:

OVERVIEW OF A RISK MANAGEMENT PROCESS THAT YOU CAN USE 03162018

Audit Committee 5 Lines of Success, Diligence, and Defense - David Tate, Esq, 05052018

COSO Enterprise Risk Management Framework ERM Components and Principles

From a prior blog post which you can find at https://wp.me/p75iWX-dk if the below scan is too difficult to read:

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Ethical Lapses, Illegal Actions, And Corporate Governance – What Should A Board And Business Do – Forwarding Post By Scott Wornow – Chocked-Full Of Helpful Information

I am forwarding a timely and helpful discussion by Scott Wornow of the Coblentz firm in which Scott discusses situations that we now regularly see in the multi-media social, business and political news: issues and situations to consider when an executive, or the business, or a high-profile person who is associated with or linked to the business is accused of a significant unethical or illegal act or lapse of judgment. Below I have provided a link to Scott’s discussion, and I have also provided a few snapshots from Scott’s discussion. Headings contained in Scott’s discussion include, for example, topics covering Contracts and Quasi-Contracts; Morals Clauses; Fiduciary Considerations; and Regulatory; Compliance and Risk Management. Scott’s discussion covers a lot of issues in a concise and to-the-point discussion. This is a discussion that is important for all businesses including public companies, nonprofits and NGOs, private companies, and even governmental entities.

These issues can cross into many different areas including law, liability and remedial actions, social and business reputation, crisis management, investigations, internal controls, governance and leadership, “righting the ship,” culture, HR and tone at the top, enterprise risk management (ERM) processes and who has responsibility for risk management, compliance policies and processes, protecting the business’s assets pre- and post-crisis, ESG, boards and audit and risk committees, the FCPA, the new DOJ guidelines on corporate compliance programs, internal and outside audit, executive officers, directors, senior managerial officers and other professionals, and in-house counsel responsibilities and possible liability, dealing with regulatory agencies, and other areas. Also consider whether the industry in which the business operates is subject to additional specific statutes, regulations, rules, or expectations that are relevant to these topics. You will find discussions on many of these topics throughout this blog.

The following are some snapshots from Scott’s discussion (I added the yellow highlights), and below the snapshots I have provided a direct link to Scott’s full discussion.

Click on the following link to access Scott’s full discussion.

Ethical Lapses, Illegal Actions, and Corporate Governance

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Remember, every case and situation is different. It is important to obtain and evaluate all of the evidence that is available, and to apply that evidence to the applicable standards and laws. You do need to consult with an attorney and other professionals about your particular situation. This post is not a solicitation for legal or other services inside of or outside of California, and, of course, this post only is a summary of information that changes from time to time, and does not apply to any particular situation or to your specific situation. So . . . you cannot rely on this post for your situation or as legal or other professional advice or representation.

Thank you for reading this website. I ask that you also pass it along to other people who would be interested as it is through collaboration that great things and success occur more quickly.

Best to you, David Tate, Esq. (and inactive California CPA) – practicing in California only.

I am also the new Chair of the Business Law Section of the Bar Association of San Francisco.

Blogs: Trust, estate/probate, power of attorney, conservatorship, elder and dependent adult abuse, nursing home and care, disability, discrimination, personal injury, responsibilities and rights, and other related litigation, and contentious administrations http://californiaestatetrust.com; Business, D&O, board, director, audit committee, shareholder, founder, owner, and investor litigation, governance, responsibilities and rights, compliance, investigations, and risk management  http://auditcommitteeupdate.com

The following are copies of the tables of contents of three of the more formal materials that I have written over the years about accounting/auditing, audit committees, and related legal topics – Accounting and Its Legal Implications was my first formal effort, which resulted in a published book that had more of an accounting and auditing focus; Chapter 5A, Audit Committee Functions and Responsibilities, for the California Continuing Education of the Bar has a more legal focus; and the most recent Tate’s Excellent Audit Committee Guide (February 2017) also has a more legal focus:

Accounting and Its Legal Implications

Chapter 5A, Audit Committee Functions and Responsibilities, CEB Advising and Defending Corporate Directors and Officers

Tate’s Excellent Audit Committee Guide

The following are other summary materials that you might find useful:

OVERVIEW OF A RISK MANAGEMENT PROCESS THAT YOU CAN USE 03162018

Audit Committee 5 Lines of Success, Diligence, and Defense - David Tate, Esq, 05052018

COSO Enterprise Risk Management Framework ERM Components and Principles

From a prior blog post which you can find at https://wp.me/p75iWX-dk if the below scan is too difficult to read:

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D&O Compass/ISS – Trends in Director Skill Sets – Starting to Include culture/HR, CSR or ESG . . . Non-Financial Skills

I found the following interesting from D&O Compass, as reported by Institutional Shareholder Services, Inc. – perhaps desired director skill sets are including or starting to include culture or HR, corporate social responsibility or ESG, and other non-financial skills and backgrounds.

But I am a bit curious about one of the comments: “. . . there is an ongoing director-level shift away from ‘traditional’ skills such as financial expertise, audit expertise, and CEO experience.” I would argue, however, that financial expertise, audit expertise, and CEO experience also can relate and be pertinent to culture or HR, corporate social responsibility, and ESG.

In fact, as you might know from my other posts and materials, it is not uncommon for the audit committee to be delegated initial risk management oversight (although in my view overall oversight of risk management remains as a board responsibility), and it has been my view that culture, corporate social responsibility and ESG, including governance, offer potential opportunities for internal audit and external audit to provide new and enhanced value-added services that could be helpful to management including executive management, the board, and audit or risk committees, and that those services could also benefit the organization as a whole and the shareholders. Please excuse the less-than-fantastic quality of the D&O Compass materials, as that was the best that could be done. Best to you, David Tate, Esq., San Francisco/California.

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Remember, every case and situation is different. It is important to obtain and evaluate all of the evidence that is available, and to apply that evidence to the applicable standards and laws. You do need to consult with an attorney and other professionals about your particular situation. This post is not a solicitation for legal or other services inside of or outside of California, and, of course, this post only is a summary of information that changes from time to time, and does not apply to any particular situation or to your specific situation. So . . . you cannot rely on this post for your situation or as legal or other professional advice or representation.

Thank you for reading this website. I ask that you also pass it along to other people who would be interested as it is through collaboration that great things and success occur more quickly.

Best to you, David Tate, Esq. (and inactive California CPA) – practicing in California only.

I am also the new Chair of the Business Law Section of the Bar Association of San Francisco.

Blogs: Trust, estate/probate, power of attorney, conservatorship, elder and dependent adult abuse, nursing home and care, disability, discrimination, personal injury, responsibilities and rights, and other related litigation, and contentious administrations http://californiaestatetrust.com; Business, D&O, board, director, audit committee, shareholder, founder, owner, and investor litigation, governance, responsibilities and rights, compliance, investigations, and risk management  http://auditcommitteeupdate.com

The following are copies of the tables of contents of three of the more formal materials that I have written over the years about accounting/auditing, audit committees, and related legal topics – Accounting and Its Legal Implications was my first formal effort, which resulted in a published book that had more of an accounting and auditing focus; Chapter 5A, Audit Committee Functions and Responsibilities, for the California Continuing Education of the Bar has a more legal focus; and the most recent Tate’s Excellent Audit Committee Guide (February 2017) also has a more legal focus:

Accounting and Its Legal Implications

Chapter 5A, Audit Committee Functions and Responsibilities, CEB Advising and Defending Corporate Directors and Officers

Tate’s Excellent Audit Committee Guide

The following are other summary materials that you might find useful:

OVERVIEW OF A RISK MANAGEMENT PROCESS THAT YOU CAN USE 03162018

Audit Committee 5 Lines of Success, Diligence, and Defense - David Tate, Esq, 05052018

COSO Enterprise Risk Management Framework ERM Components and Principles

From a prior blog post which you can find at https://wp.me/p75iWX-dk if the below scan is too difficult to read:

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MITSloan online tool to measure and compare company cultures – you should be aware – comments and screenshot FYI

This came to my attention – MITSloan online tool to measure and compare company cultures. I have previously written about culture, which, for example, is also an element of the COSO ERM framework, and was considerably in the news in 2018, including at the board level. But as I noted: will culture continue to be in the news, and will executive management and boards really take active interest? Culture also is, or could be a component of ESG.

Now apparently, and coming soon I suspect, proposals for different ways to measure culture. One or possibly two standards that are widely accepted would be helpful. Too many possible standards are not helpful, except to argue that there is no recognized standard. Business leaders, executive management, HR, directors, audit and risk committees, internal and outside auditors, in-house counsel, etc., should take note and be aware.

Regarding internal and outside audit, I have thought for a long time that they could (if they wanted to) become involved in auditing, or in auditing certain aspects or components of or processes relating to culture, governance, risk management, fraud risk, etc. I could argue that the value of internal audit and of outside audit are being passed by others who are taking the lead.

And if you are on a board, or on an audit or risk committee, where you are significantly reliant on other people to report to you, might this type of information be helpful to you in your oversight capacity? I have no explicit knowledge about how MITSloan goes about measuring and comparing company cultures, and I don’t know whether I would consider the criteria and processes that they use to be reliable and helpful; however, might it be interesting to search to see if your company is listed and evaluated? Dave Tate, Esq., San Francisco/California

Every case and situation is different. It is important to obtain and evaluate all of the evidence that is available, and to apply that evidence to the applicable standards and laws. You do need to consult with an attorney and other professionals about your particular situation. This post is not a solicitation for legal or other services inside of or outside of California, and, of course, this post only is a summary of information that changes from time to time, and does not apply to any particular situation or to your specific situation. So . . . you cannot rely on this post for your situation or as legal or other professional advice or representation.

Thank you for reading this website. I ask that you also pass it along to other people who would be interested as it is through collaboration that great things and success occur more quickly.

Best to you, David Tate, Esq. (and inactive California CPA) – practicing in California only.

I am also the new Chair of the Business Law Section of the Bar Association of San Francisco.

Blogs: Trust, estate/probate, power of attorney, conservatorship, elder and dependent adult abuse, nursing home and care, disability, discrimination, personal injury, responsibilities and rights, and other related litigation, and contentious administrations http://californiaestatetrust.com; Business, D&O, board, director, audit committee, shareholder, founder, owner, and investor litigation, governance, responsibilities and rights, compliance, investigations, and risk management  http://auditcommitteeupdate.com

The following are copies of the tables of contents of three of the more formal materials that I have written over the years about accounting/auditing, audit committees, and related legal topics – Accounting and Its Legal Implications was my first formal effort, which resulted in a published book that had more of an accounting and auditing focus; Chapter 5A, Audit Committee Functions and Responsibilities, for the California Continuing Education of the Bar has a more legal focus; and the most recent Tate’s Excellent Audit Committee Guide (February 2017) also has a more legal focus:

Accounting and Its Legal Implications

Chapter 5A, Audit Committee Functions and Responsibilities, CEB Advising and Defending Corporate Directors and Officers

Tate’s Excellent Audit Committee Guide

The following are other summary materials that you might find useful:

OVERVIEW OF A RISK MANAGEMENT PROCESS THAT YOU CAN USE 03162018

Audit Committee 5 Lines of Success, Diligence, and Defense - David Tate, Esq, 05052018

COSO Enterprise Risk Management Framework ERM Components and Principles

From a prior blog post which you can find at https://wp.me/p75iWX-dk if the below scan is too difficult to read:

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What Do You Do About The Cease And Desist Order With KPMG As Your Auditor?

On June 17, the SEC issued a cease and desist order against KPMG. You can find the order at https://www.sec.gov/litigation/admin/2019/34-86118.pdf.

The order is pretty detailed. Respondent KPMG admits to the facts set forth in Section III, and to certain violations. What do you do about the order if KPMG is your company’s auditor and you are on the audit committee, or if you don’t have an audit committee and you are responsible, or one of the people who is responsible for engaging the auditor for your business?

Everyone would acknowledge that the order discusses truly unfortunate and regrettable past events and actions by the people who were involved, which then reflects poorly upon and can negatively impact KPMG. Other than KPMG, five “Other Relevant Persons” are named or identified in the order. Three of the “Other Relevant Persons” previously worked for the PCAOB. The four “Other Relevant Persons” who worked at KPMG were all separated from the firm in 2017. The order is 21 pages in length, so this is a summary discussion. The order recognizes KPMG for self-reporting the situation, initiating an investigation under the oversight of a Special Committee of the Board, cooperating with the SEC, and undertaking remedial actions. Thus, although the cease and desist order is new, remedial actions started in 2017.

Presumably every audit engagement partner has been prepared to discuss the cease and desist order with audit clients and prospective audit clients. And if I was on the audit committee or was responsible for engaging the services of the auditor, I would raise, and to the extent possible, discuss the issue of the order with the engagement partner, in addition to any other questions that I might have about KPMG as the business’s auditor. Keep in mind that the engagement partner might well have some legal and privacy limitations about what she or he can say about the cease and desist situation and order. If KPMG has already been engaged as the auditor, I would still have those discussions with the engagement partner. Depending on the situation, I would also consider updating and requesting comments from the full board about the order and my discussions with the engagement partner. And to the extent possible, as additional information I would consider having developments and social and business media pertaining to this situation monitored, for example, to know how it is being viewed, and to monitor developments and that this situation involving KPMG doesn’t turn more negative for some unknown reason.

Some of the comments that I have read are already extremely negative toward KPMG as an entity. In that regard, I first view the people who were directly involved including their specific actions or inactions and the titles and authorities that they held within KPMG, while I separately view the actions or inactions of KPMG as an organization including the possible actions or inactions of executive officers, directors and managing agents or representatives, governance, culture and ethics, oversight, risk management, tone at the top, self-reporting and transparency, prompt and active remedial actions, and related processes and procedures.

If you are an audit committee member, or if you are responsible for engaging the outside auditor, you might also want to consider my June 9, post discussing the new PCAOB guidance pertaining to auditor communications with audit committees concerning auditor independence. Although that guidance is on an issue that is different than the KPMG cease and desist order, I believe you might find that guidance helpful during discussions with the engagement partner about the cease and desist order – for example, the guidance might provide some insight or feel as to the detail in which you might expect the engagement partner to be willing or able to discuss the cease and desist order and perhaps actions being taken by KPMG as a result. You can find my June 9, post and discussion at https://wp.me/p75iWX-ge.

The cease and desist order does not state or mean that KPMG cannot be or is prevented from being the auditor of your business. Indeed, pursuant to the order, KPMG self-reported and began remedial actions back in 2017. However, obviously the actions of the people who were directly involved do reflect poorly upon the organization, and some of the people who were involved held important or high or relatively high positions. The order, to which KPMG has agreed, requires the firm to implement significant remedial actions, training and oversight, all of which would be prudent. Obviously, it is important for every auditor, and, similarly, every business and organization including public and private businesses, nonprofits and governmental entities, to prevent judgment and ethical improprieties and shortcomings, and to promptly and appropriately address and remedy any such situation if it does occur.

Every case and situation is different. It is important to obtain and evaluate all of the evidence that is available, and to apply that evidence to the applicable standards and laws. You do need to consult with an attorney and other professionals about your particular situation. This post is not a solicitation for legal or other services inside of or outside of California, and, of course, this post only is a summary of information that changes from time to time, and does not apply to any particular situation or to your specific situation. So . . . you cannot rely on this post for your situation or as legal or other professional advice or representation.

Thank you for reading this website. I ask that you also pass it along to other people who would be interested as it is through collaboration that great things and success occur more quickly.

Best to you, David Tate, Esq. (and inactive California CPA) – practicing in California only.

I am also the new Chair of the Business Law Section of the Bar Association of San Francisco.

Blogs: Trust, estate/probate, power of attorney, conservatorship, elder and dependent adult abuse, nursing home and care, disability, discrimination, personal injury, responsibilities and rights, and other related litigation, and contentious administrations http://californiaestatetrust.com; Business, D&O, board, director, audit committee, shareholder, founder, owner, and investor litigation, governance, responsibilities and rights, compliance, investigations, and risk management  http://auditcommitteeupdate.com

The following are copies of the tables of contents of three of the more formal materials that I have written over the years about accounting/auditing, audit committees, and related legal topics – Accounting and Its Legal Implications was my first formal effort, which resulted in a published book that had more of an accounting and auditing focus; Chapter 5A, Audit Committee Functions and Responsibilities, for the California Continuing Education of the Bar has a more legal focus; and the most recent Tate’s Excellent Audit Committee Guide (February 2017) also has a more legal focus:

Accounting and Its Legal Implications

Chapter 5A, Audit Committee Functions and Responsibilities, CEB Advising and Defending Corporate Directors and Officers

Tate’s Excellent Audit Committee Guide

 

OVERVIEW OF A RISK MANAGEMENT PROCESS THAT YOU CAN USE 03162018

Audit Committee 5 Lines of Success, Diligence, and Defense - David Tate, Esq, 05052018

COSO Enterprise Risk Management Framework ERM Components and Principles

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A Few Comments About Going Concern Uncertainties, CAMs, Etc.

I don’t hear or see much in the news about disclosures about an entity’s going concern, but I have a feeling that this is going to become a bigger issue for certain public companies, their boards and audit committees, and their auditors. Evaluating going concern is a complicated topic – thus, in this post I am highlighting one aspect, but an important aspect. See, FASB ASU No. 2014-15, and subsequent materials relating thereto. I suspect that most people would conclude that evaluating a potential issue relating to going concern involves, or depending on the circumstances could involve, especially challenging, subjective, or complex auditor judgment – thus, potentially raising critical audit matters or CAMs. Click on the following link  https://wp.me/p75iWX-fr for a prior summary post about CAMs. I digress here for one comment: in regard to CAMs, one might ask, for example, “When are the circumstances of an auditor’s judgment simply ‘challenging’ v. ‘especially challenging’”?

Going concern can generally be defined as an evaluation of the entity’s expected ability to continue as an ongoing viable going concern business entity within one year after the date that its financial statements are issued (or within one year after the date that the financial statements are available to be issued, when applicable). Thus, for example, obviously for some business entities it can become a question of liquidity or liquid assets v. rate of cash burn. For the purpose of this post, I am looking at this issue only from an accounting/auditing viewpoint. Many other issues can arise, such as, for example, possible shareholder, investor, and creditor rights, and possible officer, director, and shareholder or majority shareholder liability relating thereto.

Now to the single point of this post, ASU No. 2014-15 provides that when evaluating conditions and events as to whether there is substantial doubt about an entity’s ability to continue as a going concern, the “initial” evaluation does not take into consideration the potential effect of management’s plans that have not been fully implemented as of the date that the financial statements are issued (for example, the initial evaluation might not take into consideration plans to raise capital, borrow money, restructure debt, or dispose of an asset, that have been approved but that have not been fully implemented as of the date that the financial statements are issued). Again, I digress for one comment: in the above discussion, consider, for example, how to evaluate when a matter is “approved” v. “fully implemented.”

Importantly, I note, however, that later in the going concern evaluation process, mitigating factors should be taken into consideration including, for example, the probability that management’s plans will be effectively implemented within one year after the date that the financial statements are issued, and the probability that management’s plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. Thus, in the evaluation process there is a timing aspect to considering possible mitigating factors: first they are not considered, but subsequently they are considered including their probability of implementation and success. Obviously, the going concern evaluation can be or can become complicated.

With the development of CAMs, I am sensing that issues such as these will be discussed more in public and investor view.

Onward.

Every case and situation is different. You do need to consult with an attorney and other professionals about your particular situation. This post is not a solicitation for legal or other services inside of or outside of California, and, of course, this post only is a summary of information that changes from time to time, and does not apply to any particular situation or to your specific situation. So . . . you cannot rely on this post for your situation or as legal or other professional advice or representation.

Thank you for reading this website. I ask that you also pass it along to other people who would be interested as it is through collaboration that great things and success occur more quickly.

Best to you, David Tate, Esq. (and inactive California CPA) – practicing in California only.

I am also the new Chair of the Business Law Section of the Bar Association of San Francisco.

Blogs: Trust, estate/probate, power of attorney, conservatorship, elder and dependent adult abuse, nursing home and care, disability, discrimination, personal injury, responsibilities and rights, and other related litigation, and contentious administrations http://californiaestatetrust.com; Business, D&O, board, director, audit committee, shareholder, founder, owner, and investor litigation, governance, responsibilities and rights, compliance, investigations, and risk management  http://auditcommitteeupdate.com

 

OVERVIEW OF A RISK MANAGEMENT PROCESS THAT YOU CAN USE 03162018

Audit Committee 5 Lines of Success, Diligence, and Defense - David Tate, Esq, 05052018

COSO Enterprise Risk Management Framework ERM Components and Principles

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PCAOB – Implementation of Critical Audit Matters Deeper Dive

As I discussed in a prior post re critical audit matters (Click Here), external auditors are required to include a discussion of critical audit matters in their audit opinion reports for large accelerated filers for audits of fiscal years ending on or after June 30, 2019, and for other public companies for audits of fiscal years ending on or after December 31, 2020. I expect that CAMs and the wording of CAMs will in some instances present or cause contentions between the external auditor on the one hand, and the audit committee, board, and executive officers on the other hand.

A Critical Audit Matter or CAM is defined as:

Any matter arising from the audit of the financial statements that was communicated or required to be communicated to the audit committee: and that:

  1. Relates to accounts or disclosures that are material to the financial statements; and
  2. Involved especially challenging, subjective, or complex auditor judgment.

Thus, based on the above definition, simply determining whether a matter is a CAM could be a challenging issue.

For example, in any given audit situation consider:

-What matters were communicated, or were required to be communicated to the audit committee;

-Relating to accounts or disclosures that are material to the financial statements; and

-Involved especially challenging, subjective, or complex auditor judgment?

The PCAOB has issued a more detailed and worthwhile discussion about critical audit matters and the reporting requirements that is entitled Implementation of Critical Audit Matters Deeper Dive. To view the paper, Click Here

In some circumstances critical audit matters will now become important topics for discussion. The Implementation of Critical Audit Matters Deeper Dive paper also identifies many uncertainties that are yet to be resolved relating to CAMs. Indeed, CAMs are principles based, and likely will vary from auditor to auditor based in part on the auditor’s objective, or subjective, evaluation and judgment. I note that the PCAOB’s paper provides a worthwhile discussion and many examples that should be studied. And the PCAOB also notes twice in the paper that they expect that most audits will include at least one or more CAM. And it should also be noted that the existence of a CAM should not automatically be thought of as a negative or detrimental item – it all depends on the nature of the CAM and how it is worded, as not all CAMs are equal.

Every case and situation is different. You do need to consult with an attorney and other professionals about your particular situation. This post is not a solicitation for legal or other services inside of or outside of California, and, of course, this post only is a summary of information that changes from time to time, and does not apply to any particular situation or to your specific situation. So . . . you cannot rely on this post for your situation or as legal or other professional advice or representation.

Thank you for reading this website. I ask that you also pass it along to other people who would be interested as it is through collaboration that great things and success occur more quickly.

Best to you, David Tate, Esq. (and inactive California CPA) – practicing in California only.

Blogs: Trust, estate/probate, power of attorney, conservatorship, elder and dependent adult abuse, nursing home and care, disability, discrimination, personal injury, responsibilities and rights, and other related litigation, and contentious administrations http://californiaestatetrust.com; Business, D&O, board, director, audit committee, shareholder, founder, owner, and investor litigation, governance, responsibilities and rights, compliance, investigations, and risk management  http://auditcommitteeupdate.com

 

OVERVIEW OF A RISK MANAGEMENT PROCESS THAT YOU CAN USE 03162018

Audit Committee 5 Lines of Success, Diligence, and Defense - David Tate, Esq, 05052018

COSO Enterprise Risk Management Framework ERM Components and Principles

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