This Foley blog reviews a NACD chapter meeting with senior PCAOB officials during which the auditor inspection process was addressed. Topics addressed included how an inspection works, the QC 1000 audit standard, the PCAOB’s ongoing assessment of the use of AI tools by auditors.

The blog also highlights the fact that the while the results of a PCAOB inspection are shared with auditors, they won’t be shared with audit clients unless the directors ask questions about them. This excerpt from the blog shares some specific questions relating to PCAOB inspections and “hot button” issues at the PCAOB that it recommends boards ask their auditors to address:

– Was our company’s audit reviewed this past cycle as part of your firm’s annual inspection? What areas, and any findings? And if not us, were there findings on your firm’s audits of other companies in our industry?

– What is the auditor doing with AI on our audit? Under what controls? How are those AI-assisted judgments documented?

– What are we doing with AI? How is our own finance team’s use of it weighed in the audit’s risk review? Are we ahead of, even with, or behind our peers?

– Where does the accounting firm stand on QC1000? What is changing, and what gaps should we watch?

– Of the PCAOB’s usual problem areas, revenue, impairment, internal controls, deal accounting, which apply to us this cycle? And what is the firm doing about them?

The blog also says that CFOs and legal teams should be asking about AI-related issues as well, because the auditor’s use of AI and their own will be judged together.

– John Jenkins