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In order to satisfy the increasing demands of investment community, the U.S. Public Company Accounting Oversight Board (PCAOB) has proposed to modify the audit reporting model. The new proposals include two main kinds of changes. Firstly, it is required to change the form and content of all public company’s auditors report. Those changes include disclosures of “auditor tenure” which means auditors should disclosure how long they have provided services for the company, enhance of independence, higher standardization of report? evaluation of other information outside the financial statements and enhancements of existing languages used in notes and audit report. For example, under new proposal, auditor’s responsibilities to external information, especially, the annual report led with the SEC (Gaetano, C.  2013).

Secondly, it is required to communicate “critical audit matters” in the report and related illustrations (Gaetano, C.  2013). From the aspects in change of CAM, the new requirements require auditors to disclose critical accounting matters in the audit report including discussion of identified matters, explanations of reasons why the matters are considered critical (Gimbar, Hansen and Ozlanski, 2016).

Correspondingly,to make audit report more informative and useful in decision making, IAASB also has been keep modifying audit reporting standards (IAASB 2012). For example, IAASB considers about adding the inclusion of an “Auditor commentary” section, disclosure more information relating to going concern and restructuring of the audit report (Mock et al., 2013).  More recently, IAASB issued international standard on Auditing 701, which requires auditors to address key audit matters in the report. like the CAMs in PCAOB, KAMs sections also aims to help audit report users gain a better understanding of why those matters are important to the financial statements and what other challenging, auditors’ judgement we are going to talk about the differences and similarities between PCAOB’s proposal and the IAASB’s standards. As the PCAOB’s new proposal involves a wide range of changes in auditor’s reporting requirements. The differences and similarities should also be compared from different aspects.

Firstly, from the extent of how companies will be effected by those changes, there are little difference. Under PCAOB standards, those changes apply to all audits conducted, but there are exemptions. entities like brokers and dealers, investment companies are not required to prepare the CAM in their audit reports (Lawson, O'Hara and Spencer, 2017). Comparatively, those new changes in IAASB’s standards are restrict to audits of all “listed entities.”

Secondly, there are also some similarities and differences between CAM in PCAOB and KAM in IAASB.  As the standards of the IAASB should be applied worldwide, the IAASB’s standards provide flexibility concerning audit reporting (Lawson, O'Hara and Spencer, 2017). under PCAOB standards, it has documentation requirement in CAM section and other parts, however, the IAASB do not have a documentation requirements (Michael and Washington, 2013). Hence, comparatively the requirement and definition of CAM are more restrict and have more strength and IAASB sometimes just leaves it up to different auditors’ jurisdiction from different regions and different countries(Lawson, O'Hara and Spencer, 2017). Besides, under PCAOB standards, the materiality of different accounts and transactions are used to determined ACMs. However, under IAASB standards, materiality is not mentioned by defining KAMs. What’s more, there are also some similarities between those two requirements. For both PCAOB and IAASB, Auditors are only required to communicate CAMs or KAMs related to the audit of the current reporting period. What’s more, under both standards, auditors are expected to identify at least one CAM or KAM in the audit report and to explain the reasons why they report no CAMs or KAMS.

Furthermore, under PCAOB standards, it is required to disclosure how long the auditor has provided service for the company. In contract, there is no current requirement under IAASB standards.

Explain the reasons/motivation for the changes and critique whether these changes are likely to achieve their aims.

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A lot of changes has been done in Audit reporting model concerning KAM/CAM. KAM stands for key audit matters in context PCAOB whereasCAM stands for critical audit matters in the context of IAASB(EY Report, 2016). The framework for identifying CAM/KAM are somewhat identical for PCAOB and IAASB as both begin with the materials communicated or the materials needed to be communicated to the people who are charged with furnishing governance. It is quite evident from the public views that the auditor’s opinion on all the recorded and audited financial results is valued and hence the main aim of all the prescribed norms is to increase the confidence of the public in the audit process as well as the recorded financial statement of the listed companies. However, many users of the audited reports have mentioned that it has to be more relevant as well as informative.

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