Over on TheCorporateCounsel.net, I recently blogged about some PCAOB Staff guidance on the new standard for audit reports. This Steve Quinlivan blog notes that the most controversial aspect of the new standard – the requirement to disclose “Critical Audit Matters” or CAMs – may well have important implications for M&A:
In addition to preparing the audit committee regarding potential CAMs, public companies should consider the effect of potential CAMs on M&A activity. For companies looking to be acquired, potential CAMs will likely become a subject of due diligence inquiries prior to the effective date. CAMs may also be a topic for companies subject to activist investor campaigns. Likewise, public companies looking to issue stock in acquisition transactions may receive due diligence inquiries about their potential CAMs as well.
With the exception of the provisions relating to CAMs, the new standard is effective for audits of fiscal years ending on or after December 15, 2017. For large accelerated filers, the provisions relating to CAMs go into effect for audits of fiscal years ending on or after June 30, 2019. They go into effect for all other filers for audits of fiscal years ending on or after December 15, 2020.
– John Jenkins