PCAOB sees some improvement in audit quality
May 04, 2017
On May 4, 2017, the Public Company Accounting Oversight Board (PCAOB) posted to its website remarks by Board Member Jeanette M. Franzel entitled, "Innovative & Robust Audit Profession to Serve Investors and the Public Interest," delivered at the 16th Annual Financial Reporting Conference at Baruch College in New York.
The PCAOB has been encouraging more firms to use audit quality indicators, such as the ones it proposed in 2015. The indicators are still not required by the PCAOB, but the board has been monitoring the use of the indicators by firms, audit committees, other audit regulators and academic researchers. The PCAOB staff is incorporating information from the indicators within its inspection program, analyzing various detailed measures as part of the inspections process for the large firms.
Franzel noted that some firms are actively using their own metrics to help them manage quality across their audit practices and for individual engagements. Some large firms are also publishing firm-level metrics in annual reports. The PCAOB hopes to publish a report later this year with observations from its remediation and root cause programs, including a discussion of the potential benefits of using audit quality indicators within a firm's system of quality control.
Review our publication on demystifying audit quality indicators.
Franzel also discussed the increasing use of technology by audit firms, including artificial intelligence, data analytics and distributed ledger technology such as blockchain.
“These potentially disruptive changes will present challenges and threats across the auditing profession, including the need for significant investments in technology, new management and technical skills, and even new firm business and organizational models,” she said. “Of course, these developments will present new corresponding risks to audit quality. And throughout the course of these technological changes, we cannot forget that our focus should remain on the critical role of auditors to provide assurance over management’s financial reporting and related controls for the protection of investors. If managed and implemented properly, these developments have the potential to enhance the value of the audit process and increase audit quality.”
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Review the speech by Jeanette M. Franzel on the PCAOB's website.
