On April 6, 2021, the PCAOB published two documents addressing 2021 inspections:
Audit Committee Resource – 2021 Inspections Outlook, and
Spotlight – Staff Outlook for 2021 Inspections.
While these documents are directed primarily to auditors, they provide insights to help company management avoid audit surprises and problems.
The Audit Committee Resource reinforces the PCAOB’s commitment to “seeking views and feedback from audit committees” through its outreach process. In 2019 and 2020 the PCAOB visited with over 700 audit committee chairs. It also provides audit committee perspectives for areas including:
- Auditor’s Risk Assessments
- Firms’ Quality Control Systems
- How Firms Comply with Auditor Independence Requirements
- Fraud Procedures
- Critical Audit Matters
- How Firms Implement New Auditing Standards
- Supervision of Audits Involving Other Auditors
The Spotlight report outlines several inspection process changes and focus areas for 2021. Changes to the inspection process will include reviewing financial reporting and audit risks posed by COVID-19 and reducing the predictability of the inspection process. The PCAOB will select more engagements randomly and inspect more “non-traditional” audit areas.
The report outlines areas where inspections continue to find deficiencies, such as revenue and accounting estimates. The list of other areas where the staff plans to concentrate inspection resources includes firm quality control systems, how firms comply with independence requirements, fraud procedures, critical audit matters, implementation of new auditing standards, responding to cyber threats, auditing digital assets and supervision of audits involving other auditors. These areas are consistent with those in the Audit Committee Resource.
As always, your thoughts and comments are welcome