TheCorporateCounsel.net

Last month, the PCAOB released this spotlight, Inspection Observations Related to Auditor Use of Data and Reports. The report focuses on auditors’ use of information produced by the company (“IPC”), such as invoices and shipping documents, and information from external sources, such as customer purchase orders and bank records, which must be both “sufficient” in quantity and “appropriate” (i.e., relevant and reliable).

In issuing the report, the PCAOB hopes to “help auditors understand how the testing of IPC and information from external sources is properly performed” by describing recent staff observations on this issue. 17% of identified deficiencies in the 2021 and 2022 inspection cycles related to insufficient testing procedures over the accuracy & completeness of IPC or other data or the controls over that data.

What does this mean for companies? Internal audit teams should take note! This Radical Compliance blog says this “advice” from the PCAOB “has a habit of soon becoming new demands placed upon you by your auditor.” That could mean more control testing by audit firms — and higher fees — and more required of internal accounting folks and internal audit. The blog has tips for anticipating auditor concerns, moving towards more robust systems and documenting controls.

– Meredith Ervine