Critical Audit Matters (CAMs) vs Key Audit Matters (KAMs)
By SimplyCPA · 11 October 2026
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- CAM (US public companies): A matter communicated to the audit committee that relates to material accounts or disclosures and involved especially challenging, subjective or complex auditor judgement.
- KAM (international and India): Matters of most significance in the audit, selected from those communicated to those charged with governance.
- Who must report: CAMs are required in PCAOB audits, with exemptions such as emerging growth companies. KAMs are required for listed entities under ISA 701, and SA 701 in India.
- Content: Each matter is identified, with why it was significant, how it was addressed and where it's disclosed.
- Not a modification: Neither CAMs nor KAMs change the opinion or give a separate opinion on the matter.
Why they exist
A traditional audit report said almost the same thing for every company. Investors wanted to know where the auditor spent its judgement. The PCAOB's answer was the critical audit matter (CAM), required in AS 3101 for audits of large accelerated filers from fiscal years ending on or after June 30, 2019, and for other covered companies from December 15, 2020. Internationally, ISA 701 introduced key audit matters (KAMs); India's equivalent is SA 701.
Side by side
| CAM (PCAOB AS 3101) | KAM (ISA 701 / SA 701 / AU-C 701) | |
|---|---|---|
| Applies to | Audits of SEC issuers, except emerging growth companies, brokers and dealers, registered investment companies (other than business development companies) and employee benefit plans | Listed entities under ISA 701 and SA 701; under AICPA AU-C 701, only when the auditor is engaged to report them |
| Selection | Communicated (or required to be) to the audit committee; relates to material accounts or disclosures; especially challenging, subjective or complex judgement | Of most significance in the audit, from matters communicated to those charged with governance |
| If none | The report must say there are no CAMs | Rare for listed entities; the report must say so |
| Description | Identify the CAM, explain why it's a CAM, describe how it was addressed, refer to the relevant accounts and disclosures | Similar: why it was significant and how it was addressed |
Typical CAMs and KAMs
- Goodwill and intangible asset impairment testing.
- Revenue recognition for complex contracts.
- Valuation of hard-to-value financial instruments and level 3 fair values.
- Uncertain tax positions and litigation reserves.
- Business combinations — purchase price allocation.
CAMs vs emphasis-of-matter paragraphs
An emphasis-of-matter paragraph points to something already disclosed that is fundamental to users' understanding. A CAM or KAM explains auditor judgement. A going-concern matter is reported in its own section and, under PCAOB rules, the auditor may cross-reference it from the CAM section rather than repeat it.
For Indian CAs: If you've drafted KAMs under SA 701, you already understand most of the CAM concept. The main differences are the PCAOB's definition, its exemptions, and the requirement to state explicitly when there are no CAMs.
See our AUD audit reports notes and types of audit opinions.