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The PCAOB Auditor’s Report

December 14, 2017

All publicly owned companies must have audited financial statements that contain a report of the registered independent accounting firm performing the audit. Here is a description of what the reports actually say. The following represents the most updated requirements and is applicable for audits of periods ending on or after December 15, 2017.

Accounting firm
Only registered accounting firms can perform an audit of a publicly owned company. They must be registered with the Public Company Accounting Oversight Board (“PCAOB”). Certified public accountants can audit nonpublic companies and other entities and do not need to be especially registered with the PCAOB, but must be suitably licensed to do that. This blog only covers audits of public companies under the PCAOB oversight and who also must have their quality control practices reviewed by the PCAOB. The auditor’s report for non-publicly owned companies and entities is substantially similar but the differences are not covered here.

All auditors must be independent. There are strict rules to assure this and violations are treated seriously either by the PCAOB, SEC, AICPA, peer reviewer or the state oversight committee. Very generally “independent” means the firm, its partners and certain family members can have no investment, creditor, management or other involvement in the company being audited. The independence requirements are provided by federal securities laws and applicable rules and regulations of the SEC and the PCAOB.

What the auditor did
They audited the Company’s statements that are specifically mentioned. Their responsibility was to express an opinion on the financial statements based on their audits. They point out that the financial statements are the responsibility of the Company’s management.

How they did the audit
They followed the standards of the PCAOB that required that they planned and performed the audit so they could obtain reasonable assurance about whether the statements are free of material misstatement, whether due to error or fraud; that they performed procedures that responded to those risks; that they examined on a test-basis evidence regarding the amounts and disclosures in the statements; that they evaluated the accounting principles used and significant estimates made by the Company’s management; as well as evaluating the overall presentation of the financial statements.

Purpose of what the auditor did
So they could have a reasonable basis for their opinion.

Expressing their opinion
They give their opinion that the financial statements present fairly, in all material respects, the financial position of the Company and the results of its operations and its cash flows as of, and for the dates and periods they mentioned, in accordance with accounting principles generally accepted in the United States of America.

Additional work the auditing firm did (optional in this report)
The audit report will state that they also audited in accordance with PCAOB standards the Company’s internal control over financial reporting (“ICFR”) and that there is a separate ICFR report that is also included with the financial statements. Some choose to combine the ICFR report and include the information and their opinion in the Auditor’s Report.

The ICFR report says the auditor had to plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting [only] was maintained in all material respects and included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures that they considered necessary in the circumstances; and that there is reasonable assurance regarding prevention or timely detection of unauthorized transactions that might have a material effect on the financial statements. There is a caution that internal control procedures over financial reporting may not prevent or detect misstatements.

The firm signs the report.

Period of engagement
They need to provide when they started serving as the company’s auditor.

The latest date of their responsibility for the audit is provided in in accordance with PCAOB standards.

Future changes
Critical Audit Matters (“CAM”) language, if applicable, will be added for fiscal years ending on or after June 30, 2019 for large accelerated filers and for all others for fiscal years ending on or after December 15, 2020. If there are no CAMs then that should be stated. Emerging Growth Companies (“EGC”), broker-dealers, investment companies registered under the Investment Company Act, and employee benefit plans (11K filers) are exempt from CAM reporting. EGCs have the option of including CAMs.

Margaret F. Gallagher, CPA, in our Technical Resources department assisted in the preparation of the above. Peggy can be reached at or 973.898.9494, x4414. For additional information, you can also go to as all of their standards are available for free, online.

One Comment leave one →
  1. 6hawthorne permalink
    December 14, 2017 1:20 pm

     Hi ED The only reason for Audit report is to confirm the number of the company by a iindependent firm.


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