CAQ Alert #2018-05 – PCAOB Inspections Outlook for 2019
Friday, December 7, 2018
On December 6, 2018, the PCAOB Division of Registration and Inspections staff issued Inspections Outlook for 2019 (Outlook). The Outlook highlights the division’s ongoing inspections transformation efforts and provides an overview of various areas of inspection focus for 2019. The Outlook is posted on the PCAOB’s website on the Staff Inspection Briefs page.
In addition to describing their transformation efforts, the Outlook details key areas of inspection focus, including: System of Quality Control, Independence, Recurring Inspection Deficiencies, External Considerations, Cybersecurity Risks, Software Audit Tools, Digital Assets, Audit Quality Indicators, Changes in the Auditor’s Report, and Implementation of New Accounting Standards.
The Outlook states that in 2019 the staff intends to increase their focus on the design and operating effectiveness of firms’ systems of quality control. As it relates to recurring inspection deficiencies, the Outlook states: “Globally, we continue to identify deficiencies in auditing internal control over financial reporting, revenue recognition, allowance for loan losses, and other accounting estimates, including fair value measurements (e.g., goodwill and intangible assets). Additionally, we continue to identify deficiencies related to assessing and responding to identified risks of material misstatement. We expect firms to continue to take steps to address deficiencies in these areas.”
We strongly encourage auditors to read the Outlook, along with applicable rules, standards, and guidance, to help address potential risks in the 2018 audit cycle. This resource will help auditors plan and perform their current and upcoming audits and review of their quality control systems.