PCAOB Releases Audit Focus on Journal Entries

On January 16, 2025, the PCAOB staff announced the release of a new “Audit Focus” publication about the auditor’s responsibilities related to journal entries. 

The publication focuses on PCAOB Standard AS 2401, Consideration of Fraud in a Financial Statement, and notes that common deficiencies identified in audits by PCAOB staff include: (1) not obtaining an understanding of the financial reporting process and controls over journal entries; (2) not selecting and identifying journal entries for testing to address the potential for material misstatements due to fraud; (3) not testing completeness of the population of journal entries; (4) not testing any entries meeting auditor’s fraud criteria; and (5) not obtaining evidence of an appropriate rationale for how factors identified in AS 2401 resulted in the identification of fraud risk criteria, including the consideration of manual versus automated journal entries.

A copy of the publication, titled “Audit Focus: Journal Entries,” is available here.