TheCorporateCounsel.net

Meredith blogged last year that the requirement for auditors to identify “critical audit matters” has not been living up to the PCAOB’s hopes & dreams. But based on a 3-year review of CAM trends from Ideagen Audit Analytics, it’s not because the requirement has somehow been overlooked. According to the report, 65% of 2022 opinions identified at least one CAM. This blog from Cooley’s Cydney Posner covers which topics have been most prevalent:

But taking a deeper dive, IAA pooled the CAMs related to many business combinations—asset valuation, fair value and impairment—and the result was the most common CAM subject: according to IAA, 33% of all FY2022 opinions with CAMs included a CAM for fair value of assets, exceeding the single subject total percentage for revenue recognition in FY2022. IAA notes that fair-value-related CAMs hit their highest percentage in FY2020 at 30% of total CAMs, which IAA attributes to “the uncertain forecasts indicating potential impairment during the pandemic.”

Among industries, IAA reports, CAMs regarding revenue from customer contracts were disclosed most frequently by “companies in the manufacturing industry, at 1,049 CAMs, and the services industry, at 1,045, each representing 39% of all CAMs with that topic.” It was also the most common CAM topic for companies in the manufacturing, services and construction industries. IAA observes that different characteristics of each industry may lead auditors to focus on specific audit areas.

Overall, as Cydney notes, the study flags revenue recognition from customer contracts as the most common CAM, at 13% of CAMs over the three-year period.

– Liz Dunshee