2019

PCAOB Posts Staff Preview of 2018 Inspection Observations

May 06, 2019

On May 6, 2019, the Public Company Accounting Oversight Board (PCAOB) issued the Staff Preview of 2018 Inspections Observations. This staff preview includes, for the first time, good practices regarding efforts to improve audit quality. It also addresses areas of common deficiencies, observations on technology, and implementation of new accounting and auditing standards and rules.

The preview includes observations of U.S. and non-U.S. audit firms, inspected both annually and triennially.

Highlights of good practices observed include:

  • Expanding accountability and revising training programs
  • Establishing a network of specialized professionals to address emerging risks

Areas of deficiencies observed in 2018 include:

  • Internal Controls of Financial Reporting and Revenue Risk Assessment
  • Accounting estimates such as Allowance for Loan and Lease Losses (ALLL)

Review the Staff Preview on the PCAOB's website.

PCAOB Staff provides guidance for new requirements on auditing estimates & auditor’s use of the work of specialists

Aug 22, 2019

on August 22, 2019, the Public Company Accounting Oversight Board (PCAOB) released four staff guidance documents to raise awareness and assist auditors in advance of the effective date of new estimates and specialists audit requirements. The requirements are effective for audits of financial statements for fiscal years ending on or after December 15, 2020.

“Accounting estimates and using the work of specialists are both prevalent areas of the audit,” said Chairman William D. Duhnke. “As auditors begin to plan and perform work on audits subject to new requirements in these areas, we are committed to proactively providing resources to them and supporting effective implementation.”

The staff guidance consists of:

  1. Auditing Accounting Estimates
  2. Auditing the Fair Value of Financial Instruments
  3. Supervising or Using the Work of an Auditor's Specialist
  4. Using the Work of a Company’s Specialist 

The first two documents highlight aspects of the new standard and enhancements made to integrate the Board’s risk assessment requirements when auditing accounting estimates, including fair value measurements. The other two documents highlight aspects of new requirements that apply when auditors use the work of specialists in an audit and when an auditor uses the work of a company specialist as audit evidence. 

As outlined on the implementation webpages for the new estimates standard and amendments for the auditor’s use of the work of specialists, the PCAOB is utilizing a variety of avenues to provide useful information to auditors. The Board and staff will continue to monitor firms’ implementation efforts and determine if further guidance is needed.

Review the press release on the PCAOB's website.

PCAOB Staff provides guidance in advance of CAM effective dates

Mar 18, 2019

On March 18, 2019, the Public Company Accounting Oversight Board released three staff guidance documents developed to support implementation of the new critical audit matter (CAM) requirements.

Auditors will soon be required to communicate CAMs in the auditor’s report under the standard, AS 3101, "The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion".

The staff guidance consists of the following:

  1. a high-level overview of CAM requirements
  2. thematic observations that arose from the Office of the Chief Auditor’s review of audit firms’ CAM methodologies
  3. a deeper dive on the determination of CAMs

While these documents primarily offer insights for auditors, the high-level overview—“The Basics”—may also be of interest to preparers, audit committees, and investors.

Review the press release on the PCAOB's website.

Potential approach to revisions to PCAOB quality control standards

Dec 17, 2019

On December 17, 2019, the Public Company Accounting Oversight Board (PCAOB) issued a concept release seeking public comment on a potential approach to revising the PCAOB’s quality control standards.

This potential approach is based on the proposed international standard on quality management, ISQM 1, with certain differences as appropriate for firms that are subject to PCAOB standards and rules.

Review the concept release on the PCAOB's website.

Preventing audit extinction

Oct 24, 2019

On October 24, 2019, the Public Company Accounting Oversight Board (PCAOB) released a speech by J. Robert Brown, Jr., PCAOB Member, where he discusses how the audit has evolved to retain relevance in response to the interests of investors and other market forces.

In his speech, he also highlights on the types of information increasingly used by investors that are currently outside the audit, including alternative performance measures, or what I will call in this speech Non-GAAP financial measures, key performance indicators (KPIs), XBRL, and sustainability disclosure. Finally, it helps to start conversations among investors, audit firms, and other stakeholders about relevance and possible changes that will help prevent auditors from becoming the weavers of the 21st century.

Review the full speech on the PCAOB's website.

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