These are items identified in the audit of financial statements that involved especially challenging, subjective, or complex auditor judgment. These matters are communicated to the audit committee. For example, a significant acquisition requiring complex valuation analysis, or a material legal contingency with uncertain outcomes, could each be deemed to meet criteria for this classification.
The communication of these points enhances the transparency and relevance of the auditor’s report by providing insights into the areas where the auditor exercised the most judgment. This offers stakeholders a better understanding of the audit and the financial statements. Their emergence reflects a broader movement towards enhanced audit reporting, designed to improve communication between auditors and users of financial statements.
