In PwC’s latest voluntary report on audit quality, the firm says simply: we get it.
PwC’s 33-page report is meant to answer any questions that might linger in capital markets about what the firm is doing to address regulators’ persistent demands for better audits. The report provide a point-by-point summary of how PwC is working to raise its game as the Public Company Accounting Oversight Board delivers repeated calls to all the major firms through its inspection program for better audit work.
The firm says it is investing in technology, developing its talent, and adjusting its audit approach to meet rising expectations. “We understand the importance of maintaining our focus on delivering quality, being transparent about our processes, continuously investing in innovation, and further developing the competencies that will allow us to solve important problems,” writes Michael Gallagher, managing partner in charge of assurance quality for PwC, in a blog post on the report.
PwC has established tone at the top that places a priority on audit quality, the report says, claiming 99-plus percent of its audit staff report in a confidential survey that they receive consistent messages about the importance of audit quality from firm leadership, both locally and nationally. A large majority, 97 percent, of audit professionals also report they understand the practice’s objectives regarding audit quality, PwC says.
Through its own internal inspections, the firm says 94 percent of the audits selected for inspection are in compliance with auditing standards. That’s much higher than the rates delivered by the PCAOB to all the major firms in recent years’ inspection findings, although the PCAOB is selecting audits for inspection specifically looking for those most likely to contain problems. PwC says the 58 audits selected by the PCAOB for the latest publicly reported inspection represented 3 percent of the public company audits performed that year.
In response to the PCAOB’s latest findings at PwC that 17 of the 58 audits inspected were somehow deficient, PwC says it has increased it focus on the audit of internal controls and the sufficiency of evaluating management’s key assumptions, especially looking not only at corroborating information but contradictory information. The firm says the scope and breadth of PCAOB remarks in its latest report are narrower in comparison to the year before.
In terms of the non-public findings in PCAOB inspection reports that related to quality controls and are only made public if the firms fail to act to the board’s satisfaction within 12 months, PwC says it has been cleared by the PCAOB on its 2012 report but is still waiting for word on whether its response to its 2013 report met the mark.