PCAOB Publishes 'Primer' for Audit Committees

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."
 

PCAOB Suggestions

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.
 
Related articles:
 

You may like these other stories...

Credit Suisse says pension assets at risk unless court delays sentencingJohn Letzing of the Wall Street Journal reported on Wednesday that Credit Suisse Group AG says its management of billions of dollars in assets for...
The prospect of International Financial Reporting Standards (IFRS) being fully adopted in the United States in the near future are growing less likely, as the Financial Accounting Standards Board (FASB) and the International...
House proposes $10.5B, eight-month highway billThe House Ways and Means Committee proposed a transportation funding bill on Tuesday that calls for a temporary extension of current transportation funding levels until May 31,...

Upcoming CPE Webinars

Jul 16
Hand off work to others with finesse and success. Kristen Rampe, CPA will share how to ensure delegated work is properly handled from start to finish in this content-rich one hour webinar.
Jul 17
This webcast will cover the preparation of the statement of cash flows and focus on accounting and disclosure policies for other important issues described below.
Jul 23
We can’t deny a great divide exists between the expectations and workplace needs of Baby Boomers and Millennials. To create thriving organizational performance, we need to shift the way in which we groom future leaders.
Jul 24
In this presentation Excel expert David Ringstrom, CPA revisits the Excel feature you should be using, but probably aren't. The Table feature offers the ability to both boost the integrity of your spreadsheets, but reduce maintenance as well.