Audit Deficiencies Related to Internal Control

An Analysis of PCAOB Inspection Reports

Thomas G. Calderon, PhD, and Hakjoon Song, PhD, CPA, and Li Wang, PhD, CPA

In BriefAs part of its oversight mission, the PCAOB has sought to improve the quality of U.S. public company audits. A major part of its focus has centered on auditors’ assessments of companies’ internal controls over financial reporting (ICFR), as required under the Sarbanes-Oxley Act of 2002. This article assesses whether audit quality has improved by looking at PCAOB inspection reports containing ICFR-related audit deficiencies over the past decade and determining whether auditors responded to PCAOB criticism and remediated the deficiencies found. This review can provide independent auditors, management, internal auditors, and audit committees with insight into the PCAOB's evaluation of problem areas in internal control audits. In addition, auditors can avoid becoming targets of inspection reports with ICFR-related audit deficiencies by paying closer attention to such areas.