Auditors are still struggling with many of the same issues that have appeared prominently in inspection reports the past several years—but many firms are taking steps to address recurring problems, audit regulators say.

The Public Company Accounting Oversight Board is providing a sneak peek at its 2018 inspection findings, and the news is not all bad. True to its promise, the board is reporting not only the problems it observes, but also the good practices it sees that are helping firms address ongoing challenges.

The PCAOB staff published a preview of its 2018 inspection observations, indicating inspectors continue to find many of the same problems that have prevailed in prior inspection cycles. Those include problems with the audit of internal control over financial reporting, especially with testing the design and operating effectiveness of controls and selecting controls for testing. Inspectors also notice problems with the audit of accounting estimates, primarily in allowances for loan and lease losses, accounting for business combinations, and financial instruments.

Inspectors also said they saw frequent deficiencies in the design and performance of audit procedures addressing misstatement risks in the audit of revenue. Auditors too easily agreed revenue transactions to company-prepared invoices without proper testing, the staff said, and they too often limited their testing to revenue transactions recorded near the end of the year without considering the need to test the remainder of the population.

“Based on our observations, auditors should apply due professional care in areas of significant risks, including the risk of fraud,” the brief says. “Auditor should also perform sufficient risk assessment procedures to identify the risks of material misstatement and to design procedures responsive to the assessed risks.”

Engagement quality reviews (EQRs) are also in need of some attention, the PCAOB staff said, with many deficiencies identified during inspections occurring in areas that were reviewed by EQRs that failed to spot problems. “In some instances, EQRs may have placed too much reliance on discussions with the engagement team,” the staff reported. “In other instances, EQRs may have limited their review by reading summary memos that did not provide sufficient detail to all for a review with due professional care.”

True to its word, however, the PCAOB is also trying to shed some light on good practices its inspectors are finding as well. Many firms are taking steps intended to improve audit quality, the staff said, performing root cause analyses to determine what contributes to audit quality and designing and implementing remedial actions that drive quality.

Firms are expanding accountability for audit quality beyond the lead engagement partner, the staff said, establishing accountability for engagement quality reviewers and other partners in leadership roles, such as technical experts and office leaders.

Many firms are also developing and refining their internal guidance to help auditors identify and assess risks of material misstatement, the staff notes. “When auditors performed rigorous assessments, along with appropriately designed and executed audit procedures to address the assessed risks identified, audit quality improved,” the staff reported.

Some firms have revised their training programs to include live examples to illustrate where things can go wrong in an audit. Some are providing additional support from experienced personnel not directly assigned to the audit, providing independent review of planned responses to identified risks, especially in areas of recurring deficiencies. Firms also are establishing networks of specialized professionals to address emerging risks, providing new or enhanced audit tools in areas involving significant judgment.