Audit and Assurance Practice Exam

Which of the following items would typically be included in a PCAOB audit report that includes Critical Audit Matters (CAMs)?

1. The auditor’s evaluation of the matter

2. Management’s agreement with the identified CAMs

3. Disclosure of procedures performed by the auditor

4. Indication of the significance of the matter

The correct answer is: The auditor’s evaluation of the matter

In a PCAOB audit report that includes Critical Audit Matters (CAMs), the inclusion of the auditor’s evaluation of the matter is essential. This element provides a comprehensive overview, showcasing how the auditor assessed the issues considered to be critical to the financial statement audit. The evaluation reflects the auditor's professional judgment and offers insights into the complexity and risks associated with these matters, which enhances transparency and informs users of the financial statements about the challenges faced during the audit. While the other options may contain relevant information, they do not capture a core aspect of what makes the auditor's perspective valuable. For instance, while management’s agreement with the identified CAMs is relevant, it does not provide the same depth of analysis from the auditor's viewpoint. Similarly, though the disclosure of procedures performed by the auditor can be important, it does not convey the subjective evaluation that is critical in understanding the significance of the CAM. Lastly, an indication of the significance of the matter might be inferred through other disclosures, but the evaluation itself is paramount in elucidating the auditor's thought process and the implications of these matters for the overall audit. Thus, the inclusion of the auditor's evaluation is crucial in ensuring that stakeholders gain an understanding of the most challenging aspects of the audit process.