Accounting & Auditing Update

Audit regulators are inviting feedback on a slimmed-down strategic plan, giving stakeholders a chance to influence how to regulate public company auditing.

Half of the largest public companies saw SOX-related audit costs rise in 2017, driven by regulatory pressure, M&A activity, and new accounting rules.

After some serious blows to its reputation, KPMG has decided to add outside directors to its board.

A brand new slate of audit regulators is looking for some direction as it takes the helm at the PCAOB and establishes a new strategic plan.

Former KPMG leaders gamed up to two years of inspection results, federal authorities say, but no one will discuss whether those results can or should be corrected.

Grant Thornton's latest PCAOB inspection report, dating to 2016, shows improvement over prior year results.

Audit regulators found problems with 24 percent of the audits they inspected at Deloitte in 2016, the same number inspectors flagged in 2015.

While acknowledging audit firms have taken measures to address adverse inspection findings, the PCAOB also is starting to ask if the firms are doing enough.

Based on its latest round of audit inspections in 2017, the PCAOB found some improvement at some firms, but still plenty of work to do to meet standards.

Where there are problems with audit quality, it appears to be more of a problem with people than with institutional approaches to audit work.

New leadership will soon take over the helm of the PCAOB after SEC Chairman Jay Clayton opens a public search for as many as four board positions.

Big companies subject to SOX reporting said their external audit costs increased in 2016 as auditors continue to report pressure from PCAOB inspections.

Auditors are scrutinizing the risk of management bias in arriving at accounting estimates, but not so much when it comes to the risk of measurement imprecision.

The inspection information leak that led to dismissals at KPMG and the PCAOB raises big questions about how to assure fair and transparent inspection results for all Big 4 firms.

U.S. audit regulators have settled a $1 million action with an EY affiliate in Indonesia over allegations of audit failure and noncooperation.

The PCAOB has published its last 2014 inspection report on the eight largest firms, showing gains at Grant Thornton from a year prior and slight improvement across major firms. Tammy Whitehouse reports.

The PCAOB’s earliest 2015 inspection results show some reductions in deficient audits, but also increases in restatements and withdrawn opinions. More from Tammy Whitehouse.

The PCAOB is encouraged by improvements it sees in audit inspections in internal control, but the agency is still troubled by the nature of the problems it identifies. Tammy Whitehouse reports.

As inspectors are fanning out this year to scrutinize 2015 financial statement audits, they are looking for all the usual problem areas that have plagued audit firms the past few years, but they’re also looking at economic risks and how well auditors have observed a new standard on related-party transactions. Tammy Whitehouse reports.

The International Forum of Independent Audit Regulators has adopted a memorandum of understanding around how audit regulators will cooperate in exchanging information for audit oversight purposes. Tammy Whitehouse has more.

Word from the Public Company Accounting Oversight Board is that the inspections process could be changing. According to board member Jeanette Franzel, the agency is “exploring the potential for more random selection of audits and audit areas to inspect.” Tammy Whitehouse has more.

A staff inspection brief issued this month by the PCAOB showed that preliminary counts from inspections performed in 2015 suggest the number of audit deficiencies for the largest firms has fallen, while deficiencies at smaller firms is, overall, high. The PCAOB brief stated that inspectors observed “indications of improved audit quality over time in some of the firms inspected,” attributing those improvements to new practice aids and checklists, coaching and support to audit teams, and monitoring of the quality of audit work performed.

Big 4 firms exhibited problems in 35 percent of all audit engagements inspected in 2014, and a whopping 84 percent of those deficient audits involved problems with internal control over financial reporting, according to an analysis by Dan Goelzer, a former member and acting chair of the PCAOB. The analysis shows the board found fault with slightly fewer Big 4 engagements in 2014 compared with 2013, but the share that involved problems with the internal control audit was even higher at 89 percent.

When audit inspectors begin work on 2015 financial statements, they will be looking closely at the audit of internal controls, accounting estimates, misstatement risks. Those are the key themes from the 2014 financial statement inspections, said Helen Munter, director of inspections for the PCAOB. “Audit committees might wish to discuss with their auditors the types of audit deficiencies identified in their PCAOB inspections and ask how they are addressing these matters as part of their company’s audit,” she said.

When audit inspectors begin work on 2015 financial statements, they will be looking closely at the audit of internal controls, accounting estimates, misstatement risks. Those are the key themes from the 2014 financial statement inspections, said Helen Munter, director of inspections for the PCAOB. “Audit committees might wish to discuss with their auditors the types of audit deficiencies identified in their PCAOB inspections and ask how they are addressing these matters as part of their company’s audit,” she said.