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PCAOB guidance on the quality control remediation process

  • PCAOB (US Public Company Accounting Oversight Board) Image

Nov 18, 2013

The PCAOB’s Division of Registration and Inspections has issued a document that identifies key criteria used by the inspections staff when making recommendations to the Board concerning the sufficiency of firms' remediation efforts.

A firm’s remedial efforts are evaluated by the inspections staff using the following criteria:

  • Change: Does the remedial step represent a change to the firm's system of quality control that was in effect at the time of the conduct that resulted in the quality control criticism? Depending upon the circumstances, relevant change may involve supplementing or replacing previous guidance, policies, or procedures or taking steps to increase the technical competence and proficiency of the firm's personnel.
  • Relevance: Is the remedial step responsive to and does it specifically address the quality control criticism described in the inspection report; and, does it help satisfy compliance with the Board's quality control standards? If the root cause of the underlying quality control criticism is unclear, did the firm perform an appropriate root cause analysis in developing the remedial action?
  • Design: Is the remedial step appropriately designed (either individually or in combination with other actions) to remediate the quality control criticism?
  • Implementation: To what extent was the remedial step put in operation by the close of the 12-month remediation period? If not fully implemented, has the firm demonstrated an appropriate level of diligence and reasonable progress in addressing the criticism during the 12-month period?
  • Execution and Effectiveness: Has the remedial step achieved (or, if sufficient time has not passed to measure results, is it expected to achieve) the proposed effect that it was designed to achieve? If available, what do the subsequent firm monitoring procedures and external inspection results suggest about the effectiveness of the remedial step?”

For more information and examples on the inspections staff quality control remediation process, please see the staff guidance on the PCAOB’s Web site.

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