The Public Company Accounting Oversight Board (PCAOB) published a supplement that provides audit firms with additional guidance regarding remediation.
The supplement to its Staff Guidance Concerning the Remediation Process also includes making the most of the remediation period, the potential influence of non-technical factors on persistent quality control criticisms, and more.
By law, the PCAOB board cannot disclose its criticisms of an audit firm’s quality control systems for at least 12 months after the board’s initial publication of its inspection report of that audit firm. During that 12-month period, the audit firm is expected to remediate identified quality control criticisms. If the audit firm fails to address any criticisms to the board’s satisfaction, the board will then disclose those criticisms to the public.
The new supplement to the staff guidance highlights that audit firms, when addressing quality control criticisms, may benefit by considering the following:
• Starting the remediation process sooner to take advantage of the full remediation period;
• Planning ahead in order to get the benefit of inspections staff feedback;
• Implementing actions early enough to be able to monitor their operation and include in the submission evidence that they are effective;
• Considering whether certain quality control criticisms persist due to the influence of non-technical factors, such as a firm’s culture; and
• Understanding the limits of acceptable supplemental submissions after the submission deadline.
“Making sure audit firms remedy defects in their quality control systems is an important way for the PCAOB to drive improvement in audit quality and protect investors,” PCAOB Chair Erica Williams said. “The PCAOB encourages audit firms to apply this supplement to the staff guidance when addressing quality control criticisms.”