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PCAOB issues report on implementation of and compliance with engagement quality review standard

  • PCAOB (US Public Company Accounting Oversight Board) Image

Dec 09, 2013

The Public Company Accounting Oversight Board (PCAOB) has released an eleven-page report titled "Observations Related to the Implementation of the Auditing Standard on Engagement Quality Review." This report provides information about registered audit firms' implementation of and compliance with Auditing Standard No. 7, "Engagement Quality Review."

The report is based on the PCAOB's 2011 inspections of 213 domestic and non-U.S. registered public accounting firms and approximately 820 audit engagements. During this inspection process, the PCAOB identified approximately 310 engagements in which the auditor had not obtained sufficient audit evidence that could support its opinion on the financial statements and/or the effectiveness of internal control over financial reporting (ICFR).

Although the report notes that generally the methodologies of the firms were consistent with the requirements of AS No. 7, the engagement quality review was not always executed appropriately. The report indicates actions needed by audit firms to increase the effectivness of the engagement quality reviews, including the following:

  • Assign individuals for the engagement quality review that have the appropriate experience and enough time to perform the review.
  • Engagement quality reviewers should review the PCAOB report so they are aware of the types of deficiencies that could occur.
  • Engagement teams should document appropriate information about significant findings or issues so the engagement quality reviewer can gain a thorough understanding of the issues.

The report also indicates various actions audit committees could take to inquire about the engagement quality review process at the independent audit firm.

For more information, please see the press release and the report on the PCAOB's Web site.

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