Detailed Analysis of Recent PCAOB Audit Report Changes

This report analyzes the recent changes made by the U.S. Public Company Accounting Oversight Board (PCAOB) to its audit models. The key changes include requiring auditors to disclose high-risk areas in the audit report, communicate critical audit matters (CAM), specify the audit tenure, and include a statement of auditor independence. The report compares these changes with the standards of the International Auditing and Assurance Standards Board (IAASB), highlighting similarities like the importance of KAM/CAM and documentation, and differences such as the disclosure of auditor tenure and the presentation of auditor responsibilities. The motivations behind these changes include providing investors with more informative and accurate audit reports. The changes are expected to increase investor protection, auditor responsibilities, and transparency in the auditing process. The report concludes by summarizing the impact of these changes on audit reporting and the financial industry.

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Introduction
This assignment is about the recently changed audit models of the U.S public accounting
oversight board. The changed model now requires the auditors to present the high risk area of
business in the audit report itself. An auditor is a person, who inspects the accounts of the
company or an organization and detects if there is any wrong entry of financial or non financial
transactions has been done or skipped purposely to bring the actual true financial condition or
financial report of the company to the interested peoples (Glenda Marty, 2010). An audit is done
by a certified accountant or an auditor, in this assignment we are going to discuss in detail the
need of auditing and the auditing models changed in the PCAOB.
Key Changes to Audit Report with Focus on Similarities As Well As Any Differences
The international auditing and assurance standards board (IAASB) is an international auditing
standard body that is working internationally. This body of international auditing standards was
set in 1978 march, and it is working on stabilizing the global financial system, enhancing the
role, relevance and quality of assurance and implementation of auditing standards (Philips,
2014). The public company accounting board is similar to that of IAASB; however it is a private
sector and a nonprofit corporation that works in keeping an eye on the work of the public
companies to protect the interest of the investors (Mehta, 2013). Recently the PCAOB has made
some changes into the auditing report models, these changes suggested that the auditors have to
disclose the areas of high audit risk to in the audit report. The recent changes of the PCAOB now
require the auditor’s report to be more specific and more relevant and to provide more additional
information about the audit to the client. The newly developed standard now requires the auditor
to communicate the critical audit matters (CAM) for audits that are conducted under the
standards of PCAOB. Critical audit matter (CAM) are the matters that comes out while
conducting an audit and these matters are now according to the new changes are required to be
communicated to the client. An auditor for determining the critical audit matters will require
working upon the audit risk assessment, unusual significant transactions etc. if in case there are
no critical audit matters the auditor will prepare a disclosure stating that no critical audit matter
occurred while conducting the audit (Sherlotte, 2015). Another change that has been made by the
public company accounting oversight board is that, the auditor now will have to state that when
and in which year the audit began and when it ending it comes under the tenure. Third major
change made in by PCAOB is the independence of the auditor; this change means that the audit
report will include a statement stating that the auditor must be independent. Another major
change is the address; the auditor’s report will be addressed to the company’s share holders and
to the board of directors (Katz, 2017). Now if we talk about the similarities or the differences

between the standards of the international auditing & assurance standard board and the public
company accounting oversight board then these are as follow:
We will first talk about the similarities between the IAASB and the PCAOB (Hesabras, 2017):
 KAM/CAM is those matters that arise when the audit is conducted by a certified auditor
and these matters are of much importance for the company that the auditor wants to put
before everything. Now there is a similarity between this standard of IAASB & PCAOB
as both states that KAM/CAM requires to put forward matters of more importance in the
auditing report and there is also a similarity of preparing the pattern of the KAM/CAM in
the IAASB and PCAOB.
 Documentation of important or critical matters is required under IAASB and PCAOB,
whether or not the matter is considered to be a KAM/CAM. Similarity here is that both
the auditing standard bodies requires to document matters that are of significant nature.
 The ordering of basis for opinion and opinion section in IAASB is done by presenting
opinion section first following to it the basis for opinion section, in PCAOB the ordering
is of basis of opinion and opinion section is as same as international auditing and
assurance standard board.
Now we will talk about the differences between the IAASB & PCAOB standards:
 The tenure of the auditors is not being disclosed in the IAASB, whereas the date of
starting the tenure of the auditor needs to be disclosed in the report in public company
accounting oversight board.
 In IAASB the responsibilities of the auditor are expanded, these responsibilities needs to
be prepared in a separate section of auditor’s report. While if we talk about Public
company accounting oversight board, the responsibilities of the auditors needs to be
mentioned not in a separate section but in a the basis of opinion section.
Reasons/Motivation for the Changes
The changes made in the auditing models of PCAOB are made for the first time in the 70 years
since its establishment. This is the first and the most important motivation or the reason behind
the changes made to the audit report by the PCAOB. The investors of the firm seek for more and
more information from the company about its profits or loss and about other things as well. The
members of PCAOB said in a statement that the main purpose of changing the audit report was
to prepare informative, accurate and independent audit reports.
Impact of the changes in Audit Reporting
The changes made in public company accounting oversight board will pump life into the audit
reports made by the auditors and the investors will get all the information they have been asking
from the auditors from a long time (R.Doty, 2017). The changes are likely to protect the interest

of the investors by providing them an accurate and an appropriate report about the financial
condition of the firm. These changes made in the PCAOB models for auditing will not only
protect the interest of the investors but it is going to increase the working responsibilities of the
investors and more transparency will come into the process of auditing.
Bibliography
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Hesabras. (2017, July 1). Retrieved July 1, 2017, from Hesabras:
http://www.hesabras.com/Content/media/filepool3/2017/8/569.pdf
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