News built for finance pros
CFO Brew helps finance pros navigate their roles with insights into risk management, compliance, and strategy through our newsletter, virtual events, and digital guides.
After two straight years of increasing audit deficiencies, did auditors and audit committees step up their work in 2023?
We’re still waiting on the annual audit deficiency report from the Public Company Accounting Oversight Board (PCAOB), which published its scathing review of 2022 audits last July, to find out. In the meantime, thankfully, we’ve been given something to tide us over: what the leaders of audit committees are talking about with their auditors.
This peek inside comes courtesy of the PCAOB’s conversations last year with 230 audit committee chairs, who told the regulator about their discussions on audit quality and how they’re protecting it from the happenings of our wild, wild world.
Know thy audience. The auditor watchdog reported that most audit committee chairs talk regularly with their auditors to keep tabs on their independence and systems for quality control. The chairs said they’ve talked about their inspection reports and how to fix deficiencies the PCAOB found. Let’s hear it for the bare minimum!
But really, it’s great that everyone is doing what they’re suppo—
“PCAOB staff observed, however…”
Ugh. Here it comes.
“…that some audit committees did not appear to spend the same amount of time on this review.”
All right. Well, doing even less than the bare minimum is definitely a way for those audit committees to proceed. We wouldn’t say it’s the wisest way to proceed, knowing—as those audit committee chairs surely do—that 40% of 2022 audits had at least one deficiency.
Macro, micro. A lot of audit committee chairs have been talking about how global events are affecting the audit, the PCAOB reported. Interest rates, trouble with supply chains, and the Russian war on Ukraine were some of the most commonly cited topics of conversation between chairs and their auditors.
Closer to home, committee chairs spoke with their auditors about topics related to financials (goodwill impairment, liquidity) and risk (fraud, cybersecurity, internal control deficiencies) as well as on required communications and auditor independence. “Many of these issues,” the report said, made it into auditors’ reports as critical audit matters.
That personnel touch. While some of chairs weren’t fans of remote and hybrid work for their auditors “most expressed continued confidence in the quality of audits that are conducted remotely or in a hybrid manner,” the report said. This year’s group was “pleased” with their auditors’ lack of turnover, unlike respondents last year. “Several chairs did note, however, that they continue to have concerns about the impact working in remote and hybrid environments will have on the long-term development of professionals.”