In an effort to help audit committees make informed decisions, the US Public Company Accounting Oversight Board (PCAOB) on Wednesday released a 26-page report describing how its inspections of audit firms work and how to gather information from audit firms about those inspections.
PCAOB inspection reports are partly public and partly private. In the release, Information for Audit Committees About the PCAOB Inspection Process, the PCAOB said some audit committees have told the board that their auditors decline to discuss inspection results or downplay adverse findings in the reports.
Part I of the PCAOB audit inspection report is public and describes audit deficiencies where the inspection staff found that the auditor failed to gather enough evidence to support an audit opinion. The PCAOB identified questions that audit committees may want to ask their audit firms about PCAOB inspections. These questions include:
Was the company’s audit selected for PCAOB inspection?
Did the PCAOB identify deficiencies in other audits that involved auditing or accounting issues similar to issues presented in the company’s audit?
What were the firm’s responses to the PCAOB findings?
Part II audit inspection findings are private. Regarding Part II findings, the PCAOB suggests that audit committees ask for generic information such as:
What changes is the firm making to address quality-control deficiencies?
What is the progress of the quality-control remediation process, and what submissions has the firm made to the PCAOB as part of that process?
For what years has the PCAOB made a final determination about the firm’s remediation efforts, and what was the nature of that determination?
Has the PCAOB provided initial indications that the audit firm may not have sufficiently remediated any items?
—Ken Tysiac (firstname.lastname@example.org) is a CGMA Magazine senior editor.
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