PCAOB reveals priorities for 2023 inspections

April 17, 2023

The PCAOB shared its list of priorities for 2023 audit inspections in a staff report released Monday.

"Increased deficiencies in 2021 inspections and increased comment forms in 2022 inspections revealed a troubling trend in audit quality, which we are tackling head-on in 2023," PCAOB Chair Erica Y. Williams said in a news release. "By staying ahead of new and emerging risks, our inspections plan will hold firms accountable and drive improvements in audit quality for investors."

A PCAOB report in December noted a 25% increase in year-over-year audit deficiencies.

The complete list of inspection priorities for 2023 includes:

1. Risk of fraud;
2. Auditing and accounting risks;
3. Risk assessment and internal controls;
4. Financial services specific considerations;
5. Broker-dealer specific considerations;
6. M&A, including de-SPAC transactions;
7. Digital assets;
8. Use of the work of other auditors;
9. Quality control (particularly talent retention and its impact on audit quality, and independence); and
10. Other areas of inspection (critical audit matters, cybersecurity, and use of data and technology in the audit).

The report said the PCAOB will continue to select some audits of public companies and broker-dealers for review randomly while selecting others based on a number of risk factors, including an emphasis on entities affected by volatility; Fortune 100 companies; and entities with significant digital asset activities or M&A activities.

The report reminded auditors to focus on performing core procedures while exercising "professional skepticism," along with several other reminders:

1. Understand the business in order to understand the areas most subject to risk of material misstatement, including misstatement due to fraud.
2. Consider the impact of economic sanctions on financial reporting.
3. Consider whether a cybersecurity-related incident may require a modification to the planned audit approach.
4. Ascertain whether the occurrence of subsequent events may require an adjustment to disclosures.

[Journal of Accountancy]