PCAOB Publishes Staff Inspection Brief Providing Information about 2017 Inspections of Auditors of Public Companies
The Public Company Accounting Oversight Board today published a staff inspection brief providing information about its ongoing 2017 inspections of auditors of public companies and other issuers.
The brief is intended to help investors, auditors, and others understand the areas of significant audit risks targeted by PCAOB inspectors, and encourage auditors to work to improve audit quality.
"These staff inspection briefs highlight what PCAOB inspectors look for in inspections, such as, 'Does the auditor understand how the issuer developed its estimates? Are they addressing pending accounting changes with the issuer? Have the software audit tools used in the audit to analyze data met the audit objectives?'" said Helen A. Munter, Director of Registration and Inspections.
Key areas of focus for PCAOB inspectors in 2017 include:
- Audit areas where inspectors have identified deficiencies in the past, such as assessing and responding to risks of material misstatement
- Audit areas affected by recent economic developments, including the high rate of merger and acquisition activity and fluctuations in oil and natural gas prices
- Financial reporting areas that require significant judgment, including going concern considerations and income tax disclosures
- An audit firm's compliance with new transparency rules (Form AP)
- Preparation for new accounting standards for revenue recognition and lease accounting
- Work by other auditors on multinational audits
- The auditor's use of information technology, particularly software audit tools
- The audit firm's system of quality control
In 2017, the PCAOB plans to inspect approximately 195 registered firms that audit public companies, of which 11 are subject to annual inspection. Among the 195 firms inspected in 2017, approximately 55 are non-U.S. firms in 26 countries or jurisdictions.
The appendix to the staff inspection brief released today contains additional information on the inspection program, industry sector and market capitalization demographics, and inspection data for public company audits from 2014 through 2016 inspections.