A staff report from the Public Company Accounting Oversight Board (PCAOB) states that its inspections of accounting firm audits uncovered more deficiencies last year than in the previous year, a finding that Chair Erica Y. Williams called “absolutely unacceptable.”
Approximately 40 percent of the audits reviewed
will have one or more deficiencies that will be included in Part I.A of the
individual audit firm’s inspection report, up from 34 percent in 2021 and 29
percent in 2020.
These deficiencies are up for nearly every
category of the 157 audit firms the PCAOB inspected in 2022, including global
network firms both in the United States and internationally, Williams
said in a statement.
“[A]udit firms must make changes to turn things
around and live up to their responsibility to investors,” Williams said in a
statement that announced the findings. “The PCAOB will continue demanding firms
do better, conducting transparent inspections, and bringing strong enforcement
actions where appropriate. We are also asking audit committees to hold firms
accountable by posing tough questions to their auditors on behalf of
investors.”
Although staff report, titled "Staff Update and Preview of
2022 Inspection Observations," noted that the PCAOB staff does not
analyze the root causes of deficiencies, many firms do. Some firms attributed the deterioration
of audit quality in part “to higher-than-normal staff turnover, use of less experienced
staff in general, and the ongoing impact of COVID-19 and related remote work.”
Williams pushed back on that reasoning, saying
that firms should have strategies in place to address such issues. “That war
for talent is something that has been around and is no longer a new phenomenon
and so firms again really do have to meet this responsibility and turn this
troubling trend around,” she said, according
to The Wall Street Journal. “We are three years out from the pandemic, and
firms have a responsibility to meet these challenges head-on,” she said, according
to The Financial Times.
The report noted that it "represents the views of PCAOB staff and
not necessarily those of the Board. It is not a rule, policy, or
statement of the Board."