It is hard to believe that nearly nine years ago, the PCAOB adopted a new auditing standard that requires public company audit reports to contain a discussion of critical audit matters (CAMs) that arose during the audit. If your were practicing back then, you might recall that there was a great deal of attention focused on this significant change to the audit reporting model, and we spent a lot of time trying to understand what CAMs the auditors might report on, and how that reporting interacted with the disclosure provided in the company’s SEC filing. But then, as with so many things, with the passage of time the attention to CAMs seems to have waned, and overall the number of CAMs reported by auditors has decreased.

Dan Goelzer highlighted in his most recent Audit Committee and Auditor Oversight Update a new report from PCAOB’s Investor Advisory Group with the catchy title “The Second Annual Investor Advisory Group Most Decision-Useful Critical or Key Audit Matters For 2024.” The report provides a history of CAMs, reviews the Investor Advisory Group’s activities related to CAMs, discusses the findings of the Investor Advisory Group’s CAM evaluation process, and provides suggestions for improving CAMs. Dan notes that for audit committees, the report provides insight into how investors view CAM reporting and how they would like it to be enhanced. Dan highlights the following suggestions for improving CAMs included in the report:

The IAG report concludes with three recommendations for improving CAM reporting:

– CAMs should include what the auditors found. “To facilitate communication, auditors should present their findings by including a detailed conclusion.” The IAG recommends that the PCAOB amend the CAM standard to require the auditor to describe its conclusions. Currently, the PCAOB standard merely states that the auditor “may describe” such matters as the outcome of the audit procedures performed and key observations with respect to the CAM.

– CAMs should explore non-routine topics that are more likely to provide decision-useful information. The report states: “Perhaps fearing that unique CAMs will reveal information that the management would prefer not to be disclosed, many auditors use the same topics for their CAMs every year. However, repeating CAM topics may offer little additional information to investors.” The IAG encourages auditors to use CAMs “as an opportunity to actively explore more unique, lesser-understood topics, such as tax provisions, to communicate with investors.”

– The number of CAMs reported should increase. The number of CAMs has decreased over time. See Most Audit Reports Contain a CAM, But Only One, November-December 2025 Update. The IAG report recommends that auditors consider increasing the number of CAMs in their reports.

In addition to these steps to improve CAM reporting, the IAG members also suggest adding quantitative information to CAM disclosures, providing more description of the audit procedures performed, using more bullet points, and increasing coverage of CAMs on investment research platforms.

Dan suggests that audit committees may want to discuss these ideas from the Investor Advisory Group’s report with their auditor and seek to understand the reasons for the auditor’s approach to CAM reporting, while potentially seeking input from investors on improvements to CAM reporting.

– Dave Lynn