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In July, Dave blogged about the rise in the number of deficiencies identified in audits during PCAOB inspections in 2021 and 2022. He noted that PCAOB Chair Erica Williams released a statement on the Staff report calling the deficiency rate “unacceptable.” In a speech late last week at the PCAOB Conference on Auditing and Capital Markets, Chair Williams again called out these alarming trends in deficiencies:

This means audit opinions were signed without completing the audit work required to verify the accuracy of the financial statements. That is a serious problem at any rate, and 40% is completely unacceptable. I have challenged auditors to sharpen their focus and called on audit committees to hold their firms accountable. Of course, as our third pillar of strengthening enforcement suggests, the PCAOB has not hesitated to bring enforcement cases against auditors when appropriate.

In addition to discussing enforcement, she highlighted the PCAOB’s efforts to improve the transparency of inspection results:

In May, we announced enhancements to make our inspection reports more transparent with a new section on auditor independence and a range of other improvements to make more relevant, reliable, and useful information available for investors, researchers, and others.

In July, we rolled out new features on our website to help users compare inspection report data.

This was just the beginning of our work to increase transparency and make PCAOB data more accessible.

Transparency is one of the most powerful tools the PCAOB has to improve audit quality. Sharing our inspection results empowers audit committees and boards of directors – which are responsible for hiring auditors of public companies – to hold audit firms accountable directly.

So audit committees will soon have more information on their independent auditor’s performance. Dave’s blog noted questions audit committees should consider asking their independent auditors regarding inspection results, including whether the engagement partner has been inspected and what the firm is doing to address the increasing number of deficiencies.

– Meredith Ervine