Today, the Public Company Accounting Oversight Board (PCAOB) released an update to guidance intended to supplement PCAOB Release No. 2017-001, The Auditor's Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion and Related Amendments to PCAOB Standards, adopted on June 1, 2017. The guidance, originally issued December 4th, addresses key changes that became effective December 15, 2017, and with the update, includes guidance on how to measure auditor tenure, which must be included in the audit report under the new standard (that is, the audit firm must now report the year it began serving consecutively as the company's auditor). Guidance begins on page 4 of the document and includes the following points:
- The new auditor reporting model requires a statement containing the year the auditor began serving consecutively as the company’s auditor, i.e., it should reflect the entire length of the relationship between the auditor and the company.
- Auditor tenure is calculated taking into account firm or company mergers, acquisitions, or changes in ownership structure. When a company acquires another company, if the acquirer's current auditor continues serving as the combined company's auditor, auditor tenure would continue. However, if the acquired company's auditor is selected to serve as the combined company's auditor, auditor tenure would begin at that time.
- The auditor's relationship with the company is not affected by the company's status as a public company. If a company went public and maintained the same auditor, auditor tenure includes the years the auditor served as the company's auditor both before and after the company became subject to SEC reporting requirements.
- If there is uncertainty as to the year the auditor began serving consecutively as the company's auditor, such as due to firm or company mergers, acquisitions, or changes in ownership structure, the auditor should state that the auditor is uncertain as to the year the auditor became the company's auditor and provide the earliest year of which the auditor has knowledge.