PCAOB Identifies Three Areas with Most Frequent 2016 Audit Issues

The PCAOB Board inspectors have identified three areas where audit deficiencies were most frequent in 2016.  The areas with most common deficiencies were:

1. Assessing and responding to risk of material misstatement
   • For example, some auditors did not perform tests of details specifically related to fraud risks
2. Auditing Internal Control
   • Consistent with previous years’ results, this was the area with the most frequent mistakes
   • Many auditors failed to test the design and operating effectiveness of selected controls
3. Auditing accounting estimates, including fair value measurements
   • Common deficiencies in this area related to evaluating goodwill impairment and valuing assets and liabilities in business combinations

The purpose of the PCAOB staff inspection was to assist audit firms in complying with PCAOB rules.  The inspectors examined parts of more than 780 issuer audits, and also reviewed the systems of quality control at more than 190 firms.Source link: https://www.journalofaccountancy.com/news/2017/nov/pcaob-2016-staff-inspection-findings-201717868.html