An Account Analysis Of PCAOB Inspection Reports For Triennially-Inspected Audit Firms

Abstract

Since 2005, the PCAOB (Public Company Accounting Oversight Board) has been issuing inspection reports for triennially-inspected audit firms as part of its overall mission to improve audit quality.  This study analyzes the findings in the PCAOB inspection reports by classifying the audit deficiencies cited in the reports by area of deficiency and type of audit failure.  CPA firms can utilize these findings in their efforts to reduce client engagement audit risk.  The results indicate that the overall number of cited deficiencies is declining each year, revenue and asset accounts are the most frequently cited accounts, business combinations and equity transactions are the most cited transactions, and insufficient testing or documentation is the primary type of audit failure.  We also document that most departures from GAAP occur in the accounting for business transactions or in liability accounts.