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PCAOB Staff Spotlights Quality Control Remediation

S.J. Steinhardt
Published Date:
Feb 6, 2023

iStock-519089329 Audit

The staff of the Public Company Accounting Oversight Board (PCAOB)’s Division of Registration and Inspections staff has issued a document that provides additional insights into its remediation process for audit firms whose quality control has been found to be deficient.

The staff’s 2013 guidance provided five criteria to be applied when evaluating a firm’s remediation efforts; change, relevance, design, implementation, and execution and effectiveness.

While this new document, called "Spotlight," does not replace that 2013 guidance, it presents additional insights that firms, audit committees, investors and others should consider.  The document states, "Since 2013, when the inspection staff issued guidance to firms on the remediation process ..., the Board has made a substantial number of remediation determinations. This has enabled the inspection staff to develop insights into how firms remedy criticisms in their quality control systems, as well as to identify some emerging trends and challenges related to remediation."

The additional considerations are:

• Requiring newer or enhanced responses for repeated or persistent criticisms;
• The importance of root cause analysis;
• How the PCAOB considers subsequent inspection results;
• How the PCAOB evaluates revised guidance design,
• What the PCAOB considers when evaluating the design of training programs;
• PCAOB expectations on the timing of remediation design and implementation; and
• The value of ongoing dialogue. 

Under the Sarbanes-Oxley Act, no portion of an inspection report that deals with criticisms of or potential defects in the quality control systems of an audit firm will be made public if addressed by the audit firm to the PCAOB’s satisfaction within 12 months. If those defects are not addressed within that time frame, the inspection report is made public.

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