AS 3101: The PCAOB's New Auditor Reporting Requirements

Abstract

AS 3101, The Auditor's Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion (PCAOB, 2017) represents the most significant change to American audit reports in more than 70 years. The new standard form unqualified report, which is required for audits of fiscal years ending on or after December 15, 2017, moves the auditor's opinion to the first paragraph, uses section titles to identify important information, clarifies that the financial statement notes are included within the scope of the audit, and requires auditors to disclose the year they began serving consecutively as the company's auditors. For large accelerated filers in 2019 and smaller PCAOB clients in 2020, auditors must begin identifying and discussing critical audit matters. These are the issues that arose during the audit that involved “especially challenging, subjective or complex auditor judgment.” When AS 3101's reporting requirements are completely implemented, American audit reports will change from three or four paragraphs of standardized boilerplate language to a longer, much more flexible report describing the specific judgments and procedures unique to each client.