PCAOB Staff Report Shares Observations on How Root Cause Analysis Can Drive Audit Quality

Today, the PCAOB released a new staff Spotlight report, “Root Cause Analysis – An Effective Practice To Drive Audit Quality(PDF).” 

Root cause analysis (RCA) is predicated on the belief that a problem is best solved by attempting to address, to correct, or to eliminate the fundamental cause or causes of the problem. The PCAOB strongly encourages firms to assess the underlying root causes of a deficiency so that the deficiency can be effectively addressed and ultimately remediated and eliminated. RCA is an important procedure that many audit firms use to evaluate the adequacy of and compliance with their quality control system.

The PCAOB staff believes that RCA has been shown to be an effective practice for firms to drive audit quality. The Spotlight covers:

• General considerations related to RCA
• Other observations about RCA from PCAOB inspections
• Key questions for audit firms to consider

In addition to audit firms, audit committees and others charged with governance may find the firm’s root cause information useful as they discuss past inspection deficiencies, the cause of those deficiencies, what corrective actions were taken to address these deficiencies, and what preventive measures a firm has taken to improve their audit quality going forward.

Visit the PCAOB’s Staff Publications page for more resources on the PCAOB'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.