PCAOB Issues Audit Committee Dialogue
The PCAOB today issued a communication to audit committees -- Audit Committee Dialogue -- the first in a series intended to provide insights from inspections of public company auditors that may be helpful to audit committee members in their oversight of their auditors.
The Dialogue highlights key areas of recurring concern in PCAOB inspections of large audit firms as well as certain emerging risks to the audit. The Dialogue also provides targeted questions that committee members may ask their auditors on each topic.
"We hope these insights may be useful to audit committees in their 2015 oversight activities," said PCAOB Chairman James R. Doty. "We look forward to continuing this conversation, as audit committees are key stakeholders in strengthening audit quality."
Key Recurring Areas of Concern
The Dialogue outlines the audit areas in which significant deficiencies have been found in recent years at the member firms of six large global networks, and explains how audit committees may use this information:
- Auditing internal control over financial reporting
- Assessing and responding to risks of material misstatement
- Auditing accounting estimates, including fair value measurements
- In cross-border audits, deficient "referred" work — work performed by other audit firms and used by the signing audit firm
New Risks the PCAOB is Monitoring
The Dialogue also provides some of the indicators of potential emerging risks that are informing the Board's inspection planning this year:
- Increase in mergers & acquisitions
- Falling oil prices
- Undistributed foreign earnings
- Maintaining audit quality when growing other business lines
Audit Committee members and others may sign up to receive future PCAOB updates.
Audit Committee members may contact the PCAOB directly.
About the PCAOB
The PCAOB is a nonprofit corporation established by Congress. Its mission is to oversee the 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 also oversees the audits of broker-dealers, including compliance reports filed pursuant to federal securities laws, to promote investor protection.