PCAOB Publishes 'Primer' for Audit Committees
by Terri Eyden on
By Christina Camara
Auditors often dismiss the importance of inspections by the Public Company Accounting Oversight Board (PCAOB), says its chairman, so the PCAOB is offering company audit committees some pointers about the inspection process in its twenty-six-page report -"Information for Audit Committees about the PCAOB Inspection Process." The report describes how PCAOB inspections of audit firms work and how to gather information from audit firms about those inspections.
On August 1, PCAOB Chairman, James Doty, told reporters that auditors explain away inspection findings as documentation problems, differences in professional judgments, or problems that have already been fixed. "The PCAOB would disagree with those characterizations, as report findings are serious matters," he said, according to Compliance Week.
The "primer" is designed to help audit committees learn more about the aspects of inspections that aren't public, in cases where the PCAOB is barred from discussing inspection findings. The board says firms can discuss the nonpublic inspection information, so audit committees should be skeptical if auditors say otherwise.
"We're aware that there's a range of practice with audit committees," Doty said. "That ranges from a high level of transparency and effectiveness to areas where we know it's not so effective."
The PCAOB suggests that audit committees may want to ask their auditors:
- 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 audit firm's responses to the PCAOB findings?
- What topics are included in Part II findings?
Created by the Sarbanes-Oxley corporate reform legislation, the PCAOB has been inspecting audit firms since 2003. The legislation gave audit committees the authority to hire, fire, and oversee auditors, and it strengthened qualifications for serving on an audit committee.
"This is about empowering audit committees," Doty said. The inspection reports are the "only place where they (audit committees) can find independent evaluations of their auditors," he said.
One observer says CFOs should discuss issues with audit committees sooner. "They have an issue. They're not quite sure it's a problem so they don't want to tell you about it yet," Paula H. J. Cholmondeley, audit committee chair for Nationwide Mutual Funds, told CFO magazine. "That's one of the biggest areas of risk: when the audit committee doesn't find out about something until it's too late. The organization is too far into the issue." Regularly scheduled phone calls between the CFO and the audit committee would help, she said.
- James Doty: New PCAOB Chairman Works to Increase Audit Enforcement Initiatives
- PCAOB Chairman: Audit Firm Changes May Become Mandatory
You may like these other stories...
Scott London, a former senior audit partner at KPMG LLP, was sentenced to 14 months in federal prison on Thursday for providing inside information about several of his firm’s clients to a friend, who used it to make at...
In need of CPE credits? Well, if you are an enrolled agent or CPA, you could earn as much as 18 credits by attending one of five IRS Nationwide Tax Forums this summer.The IRS Nationwide Tax Forums are three-day events that...
Russia races to dodge sanctions by adapting law to FATCARussia is in a race against the clock to adapt its laws to the Foreign Account Tax Compliance Act (FATCA) and save its banks from financial sanctions, Peter Hobson of...
Upcoming CPE Webinars
This material focuses on the principles of accounting for non-profit organizations' revenues. It will include discussions of revenue recognition for cash and non-cash contributions as well as other revenues commonly received by non-profit organizations.
During the second session of a four-part series on Individual Leadership, the focus will be on time management- a critical success factor for effective leadership. Each person has 24 hours of time to spend each day; the key is making wise investments and knowing what investments yield the greatest return.
This material focuses on the principles of accounting for non-profit organizations’ expenses. It will include discussions of functional expense categories, accounting for functional expenses and allocations of joint costs.
Save your relationship in those few situations where your performance falls far from perfect. It’s easy to want to brush service failures under the rug, hope no one notices and assume that somehow everything will be all right. In this workshop, Kristen Rampe, CPA will give you the tools to strengthen your professionalism in the face of the worst-case-scenario. Don’t let experience be your only teacher on these topics!