August 20, 2018
Published: Journal of Accountancy
Independence issues identified in the PCAOB’s 2017 staff inspections fell compared with the previous year, according to a report the board released Monday.
But the percentage of firms found to have deficiencies in their audits dropped just slightly, to 91% (68 of 75), from 97% in the previous year. The board reported that many of the audit issues identified were fundamental to conducting audits, examinations, or reviews.
Inspectors identified auditing issues with the highest frequency in the following areas:
– Auditing revenue.
– Assessing and responding to risks of material misstatement due to fraud.
– Auditing supplemental information for the customer protection rule.
The inspections also examined audit firms’ systems of quality control, where audit issues were found in areas such as exercising due professional care and performing engagement quality reviews.
Examining the annual report can help auditors evaluate their programs and procedures to prevent deficiencies in the future and improve audit quality, according to the PCAOB.
The report is based on PCAOB inspectors’ examinations of portions of 116 audits. Just four of the 48 audits examined for independence issues were found to have independence violations.