The Public Company Accounting Oversight Board (PCAOB) published information this week about its ongoing 2017 inspections of auditors of public companies and other issuers.
The staff inspection brief is designed to help investors, auditors, and others understand the areas of significant audit risks targeted by PCAOB inspectors, and encourage auditors to work to improve audit quality. In 2017, the PCAOB plans to inspect approximately 195 registered firms that audit public companies, of which 11 are subject to annual inspection. Among the 195 firms inspected in 2017, approximately 55 are non-U.S. firms in 26 countries or jurisdictions.
“These staff inspection briefs highlight what PCAOB inspectors look for in inspections, such as, ‘Does the auditor understand how the issuer developed its estimates? Are they addressing pending accounting changes with the issuer? Have the software audit tools used in the audit to analyze data met the audit objectives?'” Helen Munter, director of registration and inspections, said.
The focus of the PCAOB inspectors is on audit areas where inspectors have identified deficiencies in the past, such as assessing and responding to risks of material misstatement. They also look at areas affected by recent economic developments, including the high rate of merger and acquisition activity and fluctuations in oil and natural gas prices.
In addition, they look at financial reporting areas that require significant judgment, including going concern considerations and income tax disclosures.
Other areas of focus include an audit firm’s compliance with new transparency rules, preparation for new accounting standards for revenue recognition and lease accounting, and work by other auditors on multinational audits.
Further, they examine the auditor’s use of information technology, particularly software audit tools, as well as the firm’s system of quality control.