I previously mentioned to my Fellow CPAs, we need to step up our audit game. Unfortunately, I found another indicator of the same idea at the Journal of Accountancy – PCAOB urges broker-dealer auditors to re-examine approaches.
For their inspections of 66 firms on audits with fiscal year ended through May 31, 2014 they found 87% of engagements had deficiencies. Each of the firms inspected had at least one engagement with deficiencies.
Of particular note is all of those engagements were evaluated under GAAS, since the requirement to perform such engagements under PCAOB standards didn’t go into effect until fiscal years ending after June 30, 2014. Nagging question in the back of my mind is whether a deficiency identified by PCAOB inspectors is an actual insufficient audit or incorrect report or, on the other hand, one marginal technical breech or one insufficient documentation of a presumptively mandatory requirement. Regardless, my guess is an inspection under PCAOB rules will produce a lower pass rate than under GAAS.
Article says PCAOB is urging firms to go over their audit approaches. Regardless of how you assess the inspection process, that is the process that will be used for your inspection if your engagement gets called in. That is now the standard. It would be wise to assess their process and then adjust your audit approach and documentation accordingly.