The Public Company Accounting Oversight Board today issued a release to provide information to audit committees about its inspection process and the meaning of reported inspection results. The goal is to better equip audit committees of public company boards of directors to engage in meaningful discussion with PCAOB-registered audit firms about the results of inspections.
The release provides information about the meaning and significance of PCAOB inspection findings in the context of both engagement reviews and quality control reviews. The release also suggests some specific approaches that an audit committee might consider for initiating or enhancing inspection-related discussions with an audit firm.
"The Board encourages registered public accounting firms to communicate openly, candidly, and effectively with audit committees about the results of PCAOB inspections, including discussing the problematic aspects of otherwise nonpublic information," said James R. Doty, PCAOB Chairman.
The release highlights certain areas of inquiry that audit committees may wish to address with their auditors. These include, for example:
- whether the audit overseen by the audit committee was selected by the PCAOB for an inspection and whether any findings were made;
- potentially relevant inspection findings on other audits performed by the firm;
- the firm's response to PCAOB findings; and,
- the firm's remedial efforts in light of any quality control deficiencies that may have been identified by the PCAOB.
"An audit firm’s candid discussion of any problems identified in the PCAOB inspection can be useful to an audit committee in carrying out its responsibility for oversight of the audit engagement. Today’s release will help audit committees approach those discussions with an understanding of the Board’s perspective on important aspects of the process," Chairman Doty added.