PCAOB Implements User-Friendly Improvements In Inspection Reports
Posted by Lori Ehleben on Sep 2, 2020 4:53:00 PM
The Public Company Accounting Oversight Board (“PCAOB”) was established to oversee the audits of public companies in order to protect investors. The PCAOB inspects registered firms on a periodic basis to review samples of firms’ issuer audits and their system of quality control. Recently, the PCAOB implemented revisions to the format of their inspection report in order to make the content more informative and useful to the public.
The new report format includes five main sections:
This section includes an executive summary and certain inspection information such as number of issuer audits selected for review and the respective issuers’ year-ends.
Overview of the Inspection and Historical Data by Inspection Year
This section includes an overview of the issuer audit inspections, including historical data and generally includes the following:
- Audits Reviewed
- Part 1.A Deficiencies in the Audits Reviewed
- Audits Affected by the Deficiencies Identified in Part 1.A
- Most Frequently Identified Part 1.A Deficiencies
- Audit Areas Most Frequently Reviewed
- Audit Areas with Frequent Part 1.A Deficiencies
- Auditing Standards Associated with Identified Part 1.A Deficiencies
- Inspection Results by Issuer Industry Sector
- Inspection Results by Issuer Revenue Range
Part 1: Inspection Observations
Part 1 now includes two sections and is available to the public:
Part 1.A Audits with Unsupported Opinions
- In this section, each issuer is identified by a letter and a description of type of audit, related areas affected and deficiencies identified.
Part 1.B Other Instances of Non-Compliance with PCAOB Standards or Rules
- This new section identifies deficiencies not related to the sufficiency of an issuer’s opinion but rather relates to other areas of non-compliance with PCAOB standards or rules
Part II: Observations Related to Quality Control
These observations include criticisms and potential defects in the inspected Firm’s system of quality control. Part II is not initially issued to the public to allow the inspected Firm to address the quality control identified issues to the PCAOB’s satisfaction. If the inspected Firm does not adequately address the deficiencies within 12 months of the initial report, the inspection report will be publicly reissued to include the PART II comments.
Appendix A: Firm’s Response to the Draft Inspection Report
This area provides the Firm the opportunity to respond to the inspection report.
BBD believes the revised inspection report’s use of charts and historical data for some Firms make the report much more user-friendly.