News & Insights

Auditor Liability Bulletin

May 10, 2024

PCAOB Staff Report Notes Considerations for Audits of Clients with Commercial Real Estate Exposure

On May 6, 2024, the PCAOB Staff released a spotlight report focusing on the responsibilities of auditors in planning and conducting audits and reviews of interim financial information in industries with commercial real estate (CRE) exposure. The Staff report notes that the assumptions underlying CRE assets and financial instruments based on real estate or loans, collateralized by those assets, are areas of increasing audit risk and require heightened auditor skepticism. The report highlights a set of questions that auditors may want to consider in the context of identifying and assessing risks, including the risk of fraud. The Staff report also provides guidance on planning and performing audit procedures, specifically as it relates to asset impairment and allowance for credit losses, going concern, and interim review consideration. In addition, the Staff report notes the importance of increased communications between auditors and audit committees, and of evaluating the results of the audit, including information regarding potential bias in management’s judgements.
The PCAOB Staff’s report is available here.