On May 2, 2023, the Public Company Accounting Oversight Board (PCAOB) announced it has enhanced its inspection reports with a new section on auditor independence and a range of other improvements that the PCAOB believes increase transparency by making publicly available more information that is “relevant, reliable, and useful for investors and other stakeholders.” The changes appear beginning with PCAOB inspection reports released that same day.
The enhanced inspection reports include:
- A new section of the report focused on independence violations: Reports will feature a new independence section (Part I.C) that will discuss instances of noncompliance with PCAOB rules related to maintaining independence, as well as potential noncompliance with SEC independence rules.
- More information related to fraud procedures and the identification and assessment of the risks of material misstatements: Reports will expand Part I.B to include deficiencies related to AS 2401, Consideration of Fraud in a Financial Statement Audit, and AS 2110, Identifying and Assessing Risks of Material Misstatement.
- More commentary: Reports will provide additional commentary in Part I.A for certain situations, such as whether the audit was the firm’s first audit of the issuer or whether the firm had identified significant risks, including fraud, for areas in which PCAOB inspection staff identified deficiencies.
- New graphs: For annually inspected firms, reports will include charts to clearly show firm and engagement partner tenure.
As noted in the announcement, the PCAOB believes their enhancements will further drive audit quality and make their inspection reports even more useful for the public.