In his speech “Seeing Through the Regulatory Looking Glass: PCAOB Inspection Reports” (which includes a delightful number of Alice in Wonderland references!), PCAOB Board Member J. Robert Brown Jr. explores historical decisions the Board made about the content and structure of inspection reports. He then describes changes the current Board is making to these reports in their process of increasing transparency, including:
- Use of plain English
- Less jargon
- Providing an executive summary
- Including comparative charts and tables
In addition the Board is now grouping findings into three categories:
- Findings that included an accounting violation
- Audits with multiple deficiencies
- Audits with a single deficiency
The Board has also added a new section to its inspection reports describing deficiencies that were not previously disclosed. These deficiencies did not affect the sufficiency of audit evidence but were, nonetheless, areas where firms did not comply with audit standards. An example would be failure to complete and “lock down” audit workpapers within the appropriate time frame.
Mr. Brown’s speech also discusses areas where the Board might consider additional changes to inspection reports.
The new inspection report format has been used for six reports as of July 27, 2020. You can review these reports here.
As always, your thoughts and comments are welcome!