PCAOB Issues Staff Inspection Brief Detailing Scope and Objectives of 2016 Inspections of Auditors of Public Companies
The Public Company Accounting Oversight Board today issued a staff inspection brief detailing the scope, focus, and objectives of its ongoing 2016 inspections of auditors of public companies and other issuers.
"The information in this brief may help audit firms, investors, and others better understand the risk-based factors that the PCAOB considers when inspecting audits," said Helen Munter, PCAOB Director of Registration and Inspections.
In 2016, the PCAOB continues to focus on public company audit areas where inspectors have found frequent and recurring deficiencies in recent inspections. This includes:
- Auditing internal control over financial reporting
- Assessing and responding to risks of material misstatement
- Auditing accounting estimates, including fair value measurements
New to the 2016 inspection cycle is a focus on the auditors' implementation of a newly updated auditing standard for related party transactions, Auditing Standard 2410 (currently AS 18), which became effective for audits of financial statements for fiscal years beginning on or after December 15, 2014.
The PCAOB also considers the current economic environment and related developments in determining the scope and focus of inspections. In 2016, in particular, an economic factor under consideration is the effect on multinational public companies of the recent significant appreciation in the U.S. dollar index. Other economic factors include:
- Increased merger and acquisition activity
- Continued search for higher yielding investment returns in a low interest rate environment
- Continued fluctuations in oil and natural gas prices
In 2016, the PCAOB plans to inspect approximately 210 registered firms that audit public companies, of which 10 are subject to annual inspection. Among the 210, approximately 60 are non-U.S. firms in 25 different countries.
The appendix of the staff inspection brief released today contains additional information on the inspection program, industry sector and market capitalization demographics, and inspection focus data for public company audits from inspection cycles 2013 through 2015.