Please ensure Javascript is enabled for purposes of website accessibility
January 27, 2023

PCAOB Says Audit Failures Are No Longer Audit Failures

So, today, this happened:


You'll recall earlier this year, we pointed out new-ish language in PCAOB inspection reports that clarifies the definition of an audit deficiency. It reads:

Whether or not associated with a disclosed financial reporting misstatement, an auditor's failure to obtain the reasonable assurance that the auditor is required to obtain is a serious matter. It is a failure to accomplish the essential purpose of the audit, and it means that, based on the audit work performed, the audit opinion should not have been issued.

Considering the one goal of an audit is to issue an opinion, it seems a stretch to say a failure to accomplish that purpose isn't an audit failure. But the "failure" part has always been a touchy subject. Jay Hanson, in particular, has never really been a fan of the term audit failure.

The PCAOB also uses the word "failed" when getting into the particulars about each issuer. For example: "the Firm failed in the following respects to obtain sufficient appropriate audit evidence to support its audit opinion on the financial statements…"

But that's not an audit failure. Just a ding. A deficiency. Got it, bro.

 

 

Latest Accounting Jobs--Apply Now:

Have something to add to this story? Give us a shout by email, Twitter, or text/call the tipline at 202-505-8885. As always, all tips are anonymous.

Comments are closed.

Related articles

RSM US Finally Might Be Taking Audit Quality a Little More Seriously, According to 2021 PCAOB Inspection Report

Based on the 2021 PCAOB inspection reports we’ve reviewed so far, the audit firm that would win the “most improved” award is RSM US. From 2017 to 2020, RSM had an average yearly audit failure rate of 42%, including failing 46% of its audits reviewed by PCAOB inspectors in 2020. But during the most recent […]

Grant Thornton’s 2021 PCAOB Inspection Report Wasn’t Too Bad

Of the six 2021 PCAOB inspection reports released before the holidays, we’ve so far taken a look at five: PwC, Deloitte, EY, KPMG, and BDO USA. The last of the bunch belongs to Grant Thornton. We didn’t save the best for last, but it’s not that bad either. From 2016 until its 2020 inspection report, […]