Large accelerated filers saw an average of 1.8 issues called out by auditors as “critical audit matters” in their first round of reporting, according to analysis by Deloitte.

Across the 52 large accelerated filers with fiscal years ending June 30, 2019, the first round of CAMs called out goodwill and intangible assets more than any other accounting issue, followed by revenue and income taxes. Roughly one-third of CAMs reported in mid-2019 involved goodwill and intangible assets, while revenue drove roughly one-fifth.

CAMs made their debut in those reports under a new requirement from the Public Company Accounting Oversight Board for auditors to describe in audit reports issues that proved most difficult for auditors. Officially, CAMs are those issues related to accounts or disclosures material to financial statements and that are communicated or required to be communicated to audit committees which involved a high degree of auditor subjectivity or that were especially challenging or complex for auditors to audit.

The PCAOB included the CAM disclosures in its overhaul of the standard auditor’s report to give users of financial statements greater insight into what auditors do and what they find during the normal course of their work. Auditors are required to provide the disclosure beginning with large accelerated filers this summer, followed by the rest of their public company clients beginning in 2021. The staggered implementation was meant to give auditors and audit committees time to adapt to the new requirements.

Deloitte said 35 percent of disclosures among the 52 earliest filers addressed challenges with goodwill and intangibles, which is an inherently judgmental area of accounting and auditing; 19 percent of the CAMs arose due to revenue issues, followed by 15 percent tied to income taxes. Additional issues leading to CAMs included acquisitions and related liabilities, inventory, other liabilities, and contingencies. Another 11 percent of all CAMs arose from an assortment of other issues.

Major audit firms conducted a series of dry runs with some clients to develop their processes for complying with the new disclosure. The process led to some important discoveries, Deloitte said, giving auditors time to practice identifying and communicating CAMs, developing concise descriptions of complex issues, and sharing CAM drafts with management, audit committees, and legal counsel to set expectations.

“In general, the dry runs helped auditors, management, and audit committees be better prepared to implement the requirements when they became effective,” Deloitte said. The firm plans to continue performing dry runs with additional companies that are subject to CAM reporting in upcoming reporting periods.

The PCAOB has said it will monitor the initial CAM reports to assess implementation and determine if any further actions are warranted. “It is imperative that auditors, management, and audit committees maintain a dialogue on CAMs to prepare for this significant new requirement,” Deloitte said.