More than two years since the PCAOB adopted the new critical audit matters (CAMs) disclosure requirement, the first batch of CAMs disclosures is finally rolling out with respect to audits of large accelerated filers with fiscal years ending on or after June 30, 2019.  The much anticipated disclosures, in many respects, hew relatively closely to the expectations established by the Public Company Accounting Oversight Board in the guidance it provided in the months leading up to the first effective date of the new standard.  

Some early observations based on a sampling of CAMs disclosures provided by five audit firms covering 18 large accelerated filers are as follows:

• Number of CAMs.  The average number of separate CAMs disclosures per sampled company was two, ranging from one to three per company.  
• Financial Statement Accounts and Disclosures.  CAMs related to goodwill and other intangible assets dominated the financial statement accounts and disclosures subject to CAMs reporting, comprising over 50% of financial statement accounts involved in the sample.  A number of the sampled CAMs involving goodwill and other intangible assets arose in the context of acquisition accounting, where the valuation of such newly acquired assets gave rise to especially challenging, subjective, or complex auditor judgments.  Revenue was the next most common topic of CAMS disclosures, followed by tax contingencies and tax assets. 
• General Disclosure Observations.  Sampled CAMs disclosures tended to be relatively concise and generally provided the four required disclosures set forth in AS 3101.14 in the order set forth in the rule.  The disclosures often cross-referenced to the financial statement footnotes for additional details about the relevant financial statement account or disclosure giving rise to the CAM.  Disclosures about how auditors addressed CAMs in the audit were relatively detailed and appeared to be tailored to the specific client and CAM.  
• Presentation of Related CAMs.  Where more than one financial statement account or disclosure gives rise to CAMs disclosure for similar reasons, presentation may vary as to whether one CAM heading is presented for that matter or whether separate CAM headings are provided for each financial statement or disclosure.  For instance, some auditors have grouped under one CAM heading the valuation of intangibles including patents and trademarks and goodwill, while others have presented a separate CAM for the valuation of each type of intangible.  In some cases, the separate presentation approach may be driven by differences in the considerations leading the auditor to determine that a matter is a CAM or in how the relevant CAM was addressed in the audit.  It remains to be seen how practice will develop in this regard over time. 

These initial observations are, of course, based on a small sample size from the earliest CAMs disclosures.  Practice trends and disclosures likely will evolve as more CAMs disclosures are provided.  As the PCAOB suggested earlier this year, the initial round of CAMs disclosures with respect to audits of over 70 large accelerated filers will give the PCAOB an early look and opportunity to issue additional guidance, if needed, before the 2020 busy season begins with respect to audits of large accelerated filers with calendar year ends.