PCAOB Staff Report Outlines 2025 Inspection Priorities With Focus on Driving Improvements in Audit Quality

Public Company Accounting Oversight Board (PCAOB) inspectors outlined their priorities for 2025 inspections in a PCAOB staff report released today. The report highlights risks and other considerations the staff believes auditors should consider when planning and performing their current and upcoming audits, as well as sectors and industries that PCAOB inspection staff will prioritize. The report also provides a set of suggested questions that audit committees may consider as they exercise their oversight role.

“Inspecting audit firms is one of the most important tools the PCAOB uses to protect investors,” said PCAOB Chair Erica Y. Williams. “We encourage audit firms and audit committees to read this report, which provides timely perspectives to drive improvements in audit quality.”

Selections and Prioritized Sectors/Industries

As discussed in the report, PCAOB staff in 2025 will place continuing emphasis on selecting audits of public companies that:

• Are in industries and sectors with specialized accounting and/or that may be negatively impacted by uncertainties and volatility in the economic and geopolitical environment,
• Are in sectors where inspectors have previously found a higher number of deficiencies, or
• May have a heightened going concern risk.

In 2025, the PCAOB’s selection process will prioritize the financial, real estate, and information technology sectors. Inspectors will also focus on public companies impacted by supply chain challenges, public companies engaging in merger and acquisition activities or business combinations, broker-dealers that file compliance reports, and other broker-dealers that provide customers with various investment opportunities, such as introducing brokers.

Inspection Considerations

PCAOB staff plans to continue performing inspections with a focus on areas that pose a heightened risk to audit quality. Areas of inspection emphasis for 2025 include the following:

• Audit areas with prior execution challenges
• Audit areas where new auditing standards are being applied
• Critical audit matters
• Audit areas with increased use of technology, including use of generative artificial intelligence, at public companies and broker-dealers
• Crypto assets
• Quality control (QC) procedures, including independence and client acceptance procedures for firms entering alternative practice structures
• Culture at audit firms      

Updated List of Questions for Audit Committees

In the context of the PCAOB’s 2025 inspections, the report contains suggested questions for audit committee members to consider amongst themselves or in discussions with their independent auditors. These questions are designed principally to further two-way communication on topics such as internal control over financial reporting, materiality, auditor use of technology, audit evidence, and turnover on the engagement team.

The Spotlight can be found at the PCAOB’s Staff Publications page, along with other resources aimed at fostering understanding of the PCAOB’s and its staff’s activities and observations.

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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 registered with the Securities and Exchange Commission, including compliance reports filed pursuant to federal securities laws.

Contact

PCAOB Office of Communications and Engagement
[email protected]