Post-Implementation Review of AS 1220, Engagement Quality Review

December 19, 2018

Published: PCAOB

PCAOB staff have completed a post-implementation review of AS 1220, Engagement Quality Review. The review of AS 1220 is the PCAOB’s first post-implementation review. The review includes key findings, messages for auditors and audit committees, and enhancements to achieve more effective reviews.

To perform the review the staff analyzed information collected through the PCAOB’s inspection and enforcement programs, third-party data, and responses to a public request for comment.

Key Findings

The staff’s review of AS 1220 provides new insight into changes in engagement quality review practices and audit quality over time, but does not provide causal evidence regarding the impact of AS 1220. For example, the evidence indicates that engagement quality reviewers have greater involvement earlier in the audit process, and that audit firms have reassessed their engagement quality review assignment practices. The staff’s review also provides some evidence of improvements in audit quality after the effective date of AS 1220. Additionally, the evidence indicates that the standard did not give rise to significant unintended consequences. In terms of direct costs, although engagement quality reviewers, on average, spend more time performing their reviews in the post AS 1220 period, increases in reviewer hours are overall very small relative to average total audit hours and the average total cost of an audit.

Messages for Auditors and Audit Committees

The PCAOB reiterates to auditors and audit committees the importance of having an engagement quality review performed by a qualified reviewer who appropriately evaluates the significant judgments made by the engagement team, including the assessment of, and audit responses to, identified significant risks in an audit.

Enhancements to Achieve More Effective Reviews

The review of AS 1220 demonstrated a need to enhance PCAOB procedures, data, and techniques in advance of conducting future post-implementation reviews. These enhancements will include an earlier identification of data needs for future reviews and a more proactive approach to external engagement when conducting them.

Staff White Paper

Further details regarding the review of AS 1220, including technical details of the statistical analyses, are presented in a separate staff white paper. The white paper provides additional transparency into the staff’s approach to the review, properties of the data sets used, the methods applied, and results of the analyses.


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