backOn July 25, 2023, the PCAOB released a report titled “Staff Update and Preview of 2022 Inspection Observations.” The report presents aggregate observations from the PCAOB’s inspections of certain public company audits conducted by 157 audit firms in 2022. According to the report, when inspection reports are finalized later this year, PCAOB inspectors expect that approximately 40% of the audits they reviewed in 2022 will have had one or more deficiencies in which the audit firm failed to obtain sufficient appropriate evidence to support its opinion. That is up 6 percentage points from 2021, which was 5 points higher than the deficiency rate in 2020. The report follows Chair Erica Williams’ December 2022 warning that the PCAOB was seeing an increase in comment forms during 2022 inspections.
Related to the PCAOB’s report, Chair Williams authored an op-ed in the Wall Street Journal titled “We Audit the Auditors, and We Found Trouble.” Chair Williams called the trend down in audit quality “unacceptable” and a “serious problem.” Chair Williams also noted that the PCAOB has not hesitated to bring enforcement cases against auditors when appropriate, that it will continue to inspect audit firms to hold them accountable, and that the Board has added tools to its website to make it easier to compare deficiency rates across audit firms. Chair Williams made similar comments in remarks published on the PCAOB’s website.
The PCAOB’s press release and a copy of the report are available here, Chair Williams’ remarks are available here, and the WSJ op-ed is attached.
