Do PCAOB Audit Inspections and ICFR Assessments Protect the Public Interest?

Steven M. Mintz, PhD, and William F. Miller, EdD, CPA

In BriefThe PCAOB inspects audits of registered public accounting firms and identifies deficiencies in gathering audit evidence and internal controls over financial reporting and the failure to comply with its standards. An analysis of inspection reports shows a declining rate of deficiencies for Big Four firms between 2018 and 2020—followed by an increase in 2021. The findings indicate that auditors need to better communicate about deficiencies in internal controls over financial reporting (ICFR), whether the financial statements are free of material mis-statements, and critical audit matters. The PCAOB should timely disclose the rate of deficiencies in audit firm quality controls, engagement quality controls, and the names of company clients on whose inspections were deficient, as well as accelerate its review of audit quality indicators.