The Public Company Accounting Oversight Board’s top targets for its 2017 inspections include how auditors have handled audits of internal control over financial reporting, their assessment of and response to the risk of material misstatement, and their procedures for obtaining an understanding of and testing estimates, including fair value.
These areas make up a third of the areas identified in a recent PCAOB report.
In accordance with the Sarbanes-Oxley Act, the PCAOB inspects firms that audit public companies and establishes audit standards for those firms. To maximize the efficiency and impact of their inspections process, the PCAOB selects issuers and audits to examine based largely on a risk-based assessment.
Top three areas of focus
According to the PCAOB, “Inspections staff typically focuses on audit areas that present auditing challenges and significant audit risk, including risks of material misstatement in the financial statements, as well as areas of recurring audit deficiencies both within and across firms.”
The most frequent and recurring audit deficiencies, as noted in these excerpts from the PCAOB report, are:
Additional areas of focus for 2017 inspections include:
Further details can be found in the PCAOB’s Staff Inspection Brief: Information about 2017 Inspections.