Jay Clayton, SEC chairman said the objective of the rule was to provide investors with meaningful insights into the audit from the auditor, which he strongly supports.
Adoption of the proposed rule, entitled the Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion, will ensure that the auditor is required to include information relating to critical audit matters (CAMs) and the inclusion of auditor tenure.
Clayton said CAMs would cover matters discussed with the audit committee that related to material accounts or disclosures and involved especially challenging, subjective or complex auditor judgment.
Despite questions being raised over potential litigation issues, he believed the adoption would provide investors with a beneficial understanding of how key decisions were reached.
A thorough post-implementation review (PIR) would monitor and analyse the changes, drawing on information from large accelerated filers in order to look out for “unintended consequences.”
Dependent on the information gained from the PIR, the board of the SEC would be open to further change if necessary, Clayton said.
The process leading to the approval of the proposed rules followed investor opinion that auditor reports should contain more specific information on how judgements were reached.
The changes approved on Monday are the first substantial to the content of US auditor’s reports for 70 years.