If your audit committee could use some guidance when it comes to inspections from audit firms and getting information about your inspection, you’re in luck.
This past Wednesday the Public Company Accounting Oversight Board (PCAOB) released a 26-page document that spells out just how PCAOB inspections work and also offers some questions your committee may want to ask audit firms about the inspection.
The reason for this report? The document said some committees had told the board the inspections were helpful but other committees said the opposite. Among the complaints: Audit firms declined to discuss their PCAOB inspection results with them or downplayed the results of adverse findings.
The report aims to demystify the process.
Public and private information
The high-level summary points out that, by law, audit firms can not divulge all information to audit committees.
But when curious about private information the PCAOB recommended that audit committees ask these questions:
- What changes will the firm make to address quality-control deficiencies?
- What is the progress of the quality-control remediation process, and what has been submitted to the PCAOB in that process?
- What was the PCAOB’s determination of the firm’s remediation efforts?
- Has the PCAOB given an indication that the audit firm hasn’t sufficiently corrected any items?
The document also offers more specific questions committees should ask when they receive public information:
- Was the company’s audit selected for PCAOB inspection?
- Did the PCAOB identify deficiencies in other audits that involved auditing or accounting issues similar to issues presented in the company’s audit?
- What were the firm’s responses to the PCAOB findings?