How Many Firms Are Registered With The Pcaob

Annually, GAAP Dynamics publishes an eBook detailing the results of our analysis of the PCAOB inspection reports. (Click here to learn more than about this twelvemonth'due south eBook in this blog post!) Our analysis of the 2017 PCAOB inspection reports reflected a combined deficiency charge per unit of 30% for annually inspected firms! I'll explain below which firms were in the assay, how these results compare to prior years and the peak issues noted in the reports.

The Information:

How did we go our hands on this information?

More than 1,850 public accounting firms, both in the U.S. and away, are registered with the Public Company Accounting Oversight Board (PCAOB). If an accounting house audits a publicly traded visitor or securities broker-dealer registered with the SEC, it is subject to regular PCAOB inspections. These inspection reports are made public and can be obtained directly from the PCAOB's website. To perform our analysis, nosotros but downloaded the reports and started reading!

Which firms were included in the analysis?

The vast majority of these bookkeeping firms are inspected at least once every three years — and then called "triennially inspected firms." Yet, if an accounting firm audits more than than 100 public companies or registered broker-dealers, it is subject to almanac PCAOB inspections. Our analysis focused on the annually inspected firms.

Deficiency Rates:

How did these firms fare in the almost contempo inspections?

Similar I mentioned above, based on the 2017 inspection reports, the annually inspected firms had a combined inspect deficiency rate of 30%. Of the 279 audits inspected, 85 audits had at least one audit deficiency noted past PCAOB inspectors. The audit deficiency rate for private firms varied widely, from a low of 13% to a high of 73%! That's quite the range!

How does this audit deficiency charge per unit compare with prior years' inspection results?

At 30%, the audit deficiency rate is down considerably from rates noted in prior years. Kudos to the profession! Just of course, audit quality tin always be improved – and that's what we should exist striving to do!

1. As of the engagement of publication, one 2017 inspection report was not still bachelor for an annually inspected firm.

Top Issues:

What were the auditing standards noted most often in the PCAOB inspection reports?

For each deficiency noted, the inspection report details the relevant inspect standard(due south). We compiled the deficiencies in the annually inspected house reports by each inspect standard.

Our analysis reflected the virtually deficiencies occurred with respect to:

Auditing internal control over fiscal reporting – 33%,
Assessing and responding to risks of fabric misstatement – 33%,
Auditing accounting estimates – 9%,
Auditing off-white value measurements and disclosures 7%, and
Performing audit sampling procedures – 15%

Which fiscal statement areas had the about issues?

The inspection reports additionally particular the financial statement business relationship or surface area in which the deficiency was noted. The top 5 accounts or areas were:

Acquirement
Loans and the Allowance for Loan Losses
Investment Securities, including Derivatives and Equity Method Investments
Inventories and Related Reserves
Business Combinations

These results tin be used by firms to focus on these areas to improve their inspect quality, as these areas contributed to 73% of all audit deficiencies noted!

Analyzing Results:

What else does our analysis reverberate?

man-magnifying-glass

Our recently released eBook contains more item on the information above and also takes a deep-swoop into the top deficiency areas. For the superlative deficiency areas, we explicate the underlying auditing standard, pull actual deficiencies straight from inspection reports to hash out what went wrong, and provide insights to prevent these deficiencies from happening in the future.

This twelvemonth we've partnered with Adigeo Consulting LLC to incorporate viewpoints from former PCAOB inspection leaders. We also discuss the latest developments in PCAOB inspections, areas of focus for future inspections, and international inspection results. Download our eBook today for FREE to acquire more!

Disclaimer

This mail is published to spread the love of GAAP and provided for advisory purposes simply. Although nosotros are CPAs and accept fabricated every effort to ensure the factual accurateness of the mail as of the engagement it was published, we are not responsible for your ultimate compliance with accounting or auditing standards and you lot agree not to hold u.s.a. responsible for such. In addition, we have no responsibility for updating old posts, but may do and then from time to time.