Welcome to the PCAOB Forum on Auditing in the Small Business Environment. I am Jeanette Franzel, Board Member at the Public Company Accounting Oversight Board. I will be the host and moderator today. Before I go further, I must tell you that the views I express today are my personal views and do not necessarily reflect the views of the Board, any other Board member, or the staff of the PCAOB.
This is our eighth year of holding forums in cities across the United States on auditing in the small business environment. During 2011, the Board held seven of these forums across the U.S., reaching more than 750 participants. The goal of these meetings is to create an opportunity for discussion and dialogue between PCAOB and auditors in smaller firms by providing opportunities for auditors to learn about the PCAOB's work, and to provide feedback and ask questions about PCAOB activities-- including inspections, auditing standards and guidance, and current projects and priorities of the Board. So please participate. We welcome your input and questions.
The statutory mission of the PCAOB is to oversee audits of public companies in order to protect the interests of investors and further the public interest in the preparation of informative, accurate, and independent audit reports. The PCAOB is also charged with overseeing the audits of broker-dealer compliance reports under federal securities laws to promote investor protection. We fulfill our mission through our inspections, our authority to set auditing standards, and our enforcement efforts. We are going to be talking today about those programs through presentations and case studies, with special emphasis on some of the issues facing smaller firms.
Today, we will cover a number of updates on the auditing environment, audit standard-setting activities, related SEC activities, and a review of common financial reporting issues facing smaller issuers. In addition, we will spend a considerable amount of time discussing practical aspects of auditing through our case studies involving the top ten inspection findings and the relevant auditing standards. Finally, we will cover the process for remediation of deficiencies detected during PCAOB inspections.
In 2011, there were 476 domestic firms that issued audit opinions on the financial statements of 100 or fewer issuers, making them subject to PCAOB inspections every three years, which is why we sometimes refer to these firms as "triennial firms." Of those firms, 287, or 60 percent, issued audit opinions on between 1 and 5 issuers.
The triennial firms include a broad range of firm size, structure, and practice, including sole proprietorships with small staffs to large network firms with dozens of partners and multiple offices. These firms audit public companies of all types and sizes, including shell companies, small manufacturing and financial services companies, and new startups, with market caps in the tens of millions of dollars, and larger companies that encompass multiple industries with market caps in the billions of dollars. In the aggregate, triennial firms audit the financial statements of issuers that represent $110 billion to $120 billion in U.S. market capitalization (based on data as of December 31, 2011). Ensuring that these firms consistently perform high quality audits is important to the Board as well as the investing public.
Auditors have been given an important and trusted role in the capital markets, and, from time to time, that role has been re-examined by the government and the profession itself. Such examination is appropriate, given the auditors' role of providing assurance to investors, lenders and others that an audited company's financial statements and related disclosures fairly present the institution's financial results in conformity with applicable accounting and disclosure standards and rules.
Clearly, reliable financial statements with auditor assurance are important to your clients, their investors, and the broader financial markets. A strong, high quality audit function is essential to the effective functioning of the capital markets, which in turn, affects the well-being of American families. More than half of American households invest their savings in securities to provide for retirement, education, and other goals.
It is encouraging that we have heard from many stakeholders who believe that audit quality has improved since the passage of the Sarbanes-Oxley Act and the establishment of the PCAOB. But there is still more that needs to be done. The Board is concerned by the number of serious deficiencies found in our 2010and 2011 inspections. Our inspection findings spiked in the 2010 inspections for the annually and triennially inspected firms. Those inspections generally looked at audits of 2009 financial statements. Inspection findings have remained at a relatively high level for the 2011 inspections.
Later this morning, we will discuss our "Top 10 Common Inspection Findings." It is interesting to note that there is a high degree of overlap with the top 10 accounting matters identified by the SEC. These include matters that are relatively basic as well as issues that are very complex. Our case studies today will specifically focus on several of these areas. Also, in our inspections, we have noted that the following situations tend to increase the likelihood that findings will be identified:
Our inspections staff devote considerable attention and time during the inspection process to encourage firms to evaluate possible root causes for deficiencies within the firm's structure, operations, processes or other areas that detract from audit quality. Today we will discuss the inspection procedures relating to firms' remediation plans and actions. In general, firms have taken appropriate steps to remediate identified quality control findings. Remediation remains an area of strong focus of the Board and staff.
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Clearly, audit quality requires constant attention and work. Auditing is difficult and filled with competing tensions, and we can and should continue to learn from years of experience. I hope that you find todays program useful and that you will actively participate in today's discussions and take this information back to your firms. We also welcome your input and feedback throughout the program.
 The Board is currently in the process of preparing reports covering our inspection results for the period 2007 - 2010, which we plan to issue later this year.