Last month, the Public Company Accounting Oversight Board (PCAOB), released its “Information for Audit Committees About the PCAOB Inspection Process” [PDF] (Release). The purpose of the Release is to “assist audit committees in (1) understanding the PCAOB’s inspections of their audit firms and (2) gathering useful information from their audit firms about those inspections.”
The Release provides an overview of the PCAOB’s inspection process, explaining that the PCAOB conducts inspections of audit firms that audit Securities and Exchange Commission (SEC) reporting companies for compliance with certain laws, rules and professional standards in connection with the audit firms’ audit of their public company clients, noting that that the inspections are “designed to identify and address weaknesses and deficiencies related to how a firm conducts audits.” The PCAOB’s inspection process includes an in-depth examination of certain aspects of certain audits performed by the audit firm as well as the firm’s system of quality control over its audit processes. Individual audits are chosen for inspection not randomly but on a “riskweighted basis” that “heighten[s] the possibility that auditing deficiencies are present.” Therefore, if a company’s audit is chosen for inspection, it can indicate that the PCAOB believes there is a higher risk of a deficiency with that audit.
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