The New Independent Auditor's Report

Date01 April 2018
Published date01 April 2018
AuthorDonald A. Walker
© 2018 Wiley Periodicals, Inc.
Published online in Wiley Online Library (
DOI 10.1002/jcaf.22337
The New Independent Auditor’s Report
Donald A. Walker Jr.
On October 23, 2017, the Secu-
rities and Exchange Commis-
sion (SEC) approved the new
auditing standard AS 3101, The
Auditor’s Report on an Audit of
Financial Statements When the
Auditor Expresses an Unquali-
fied Opinion. This auditing
standard requires expansion
of the auditor’s report to pro-
vide additional information
about the independent audit
of financial statements of an
SEC registrant. This article will
address the requirements of
the new standard, and will then
explain why the registrant’s
audit committee members and
executive managers will be
concerned with content of the
new report and the additional
communication with stakehold-
ers which goes far beyond that
of the current “pass/fail” audi-
tor’s report. The new standard
and its amendment to AS 1301
Communications with Audit
Committees requiring the audi-
tor to discuss a draft of its
report with the audit commit-
tee will expand the committee’s
inquiries and responsibilities.
The Public Company
Auditing Oversight Board
(PCAOB) began this standard-
setting project in 2010 and
issued its concept release in
2011. It issued a proposal in
2013, and a reproposal in 2016
after two rounds of comments
from all stakeholder sources.
The PCAOB issued the final
standard, subject to SEC
approval pursuant to Section
107 of the Sarbanes-Oxley Act,
on June 1, 2017.
The requirements of the
standard, except those requiring
communications about critical
audit matters (defined below),
are applicable to all companies
for audits of fiscal years end-
ing on or after December 15,
2017. Communications about
critical audit matters are not
required for audits of emerging
growth companies, brokers and
dealers, investment companies
except business development
companies, and benefit plans.
Communications about critical
audit matters are required for
audits starting with fiscal years
ending on or after June 30, 2019
for large accelerated filers and
for those ending on or after
December 15, 2020 for audits of
all other companies for which
communications about critical
audit matters are required.
For auditor reports on
financial statements for years
ending on or after December
15, 2017, the following are
Auditor tenure: stating
when the auditor began
serving consecutively as the
company’s auditor;
Independence: a statement
of the requirement for
the auditor to be
Addressee: the report
will be addressed to the
company’ shareholders
and board of directors or
equivalent (but permissibly
Amendments to basic ele-
ments of report: changing
certain standardized lan-
guage. Importantly, adding
the phrase “whether due
to error or fraud” where
the report describes the
auditor’s responsibility
under PCAOB standards
to obtain reasonable assur-
ance about whether the
financial statements are
free of material misstate-
ment; and
Standardizing the form of
the report: to present the
auditor’s opinion in the
first section of the report,
and to add section titles for
guidance to the reader.

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