To audit public companies our Firm must be registered with the Public Company Accounting Oversight Board (“PCAOB”), the watchdog of the public accounting industry. For us smaller firms, the PCAOB is required to inspect our audit work papers at least once every three years. Believe us, these inspections are not very easy as the inspectors critically analyze and challenging key areas of the audit work papers. The process is time consuming and stressful. At the end of the process, a report is issued identifying their findings. The report is available to the public through the PCAOB’s website. Although the PCAOB members have repeatedly stated that the inspection reports are not designed or intended to rate accounting firms according to a scorecard. We at dbbmckennon believe that at times these reports can provide a rough bearing as to the quality of your independent auditor, especially for the small/medium firms. You can find your firms inspection report here. The most important area of the report is section A “Review of Audit Engagements”. Within the section, the PCAOB highlights areas in which they have identified audit deficiencies. Meaning areas in which the firm did not adequately document their audit procedures. Generally, a firm might expect to get one or two comments regarding its work papers. Anything in excess of this might be a cause for concern.
Being a member of the PCAOB is a privilege not a right. The PCAOB has the power to rescind a firm’s registration within the PCAOB. Upon rescinding, all of the firm’s audit reports will be deemed invalid, thus requiring the company’s financial reports to be re-audited by a new firm. For an example of an action against a firm, see the disciplinary release on Moore & Associates.
The answer to our questions is YES! At dbbmckennon we pride ourselves on the timeliness and quality of services we provide. If you have any questions regarding your firm’s report or the inspection process and how it might impact you, feel free to contact us.