PCAOB Staff Report: Firms Must Remedy Quality Control Deficiencies

Today the PCAOB released a new staff report, "Additional Insights on the Remediation Process."

As part of its strategic drive to enhance PCAOB inspections, the PCAOB is focused on audit firms’ quality control defects – particularly those that are persistent – and the steps that firms take to remediate them.

Under the Sarbanes-Oxley Act and PCAOB rules, the Board does not disclose its criticisms of a firm’s quality control systems for a period of 12 months after the Board’s initial publication of an inspection report. During that period, the firm is expected to address identified quality control deficiencies. If the firm fails to address quality control deficiencies to the Board’s satisfaction, the Board discloses those criticisms to the public.

This staff Spotlight highlights some of the factors that the staff considers, particularly related to design, implementation, and effectiveness of a firm’s actions to remediate quality control deficiencies. Key considerations discussed include heightened expectations for addressing repeat or persistent quality control deficiencies, the importance of root cause analysis, how the PCAOB staff considers subsequent inspection results, PCAOB staff expectations on the timing of remediation design and implementation, and more.

This Spotlight reflects the staff’s current remediation program, as well as previous Board and staff guidance documents that are available on the PCAOB’s website.

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About the PCAOB

The PCAOB is a nonprofit corporation established by Congress to oversee the audits of public companies in order to protect investors and further the public interest in the preparation of informative, accurate, and independent audit reports. The PCAOB also oversees the audits of brokers and dealers, including compliance reports filed pursuant to federal securities laws.