The Public Company Accounting Oversight Board (PCAOB) staff recently issued an overview of its planned 2022 inspection focus areas and other related matters. The overview notes that the PCAOB's 2022 inspection plans will directly focus on anticipated financial reporting and audit risks arising from:
- Increased initial public offerings and merger and acquisition activities, including transactions with special purpose acquisition companies (SPACs)
- Widespread disruptions in supply chains
- Continued effects of COVID-19, especially within high-risk industries
- Fluctuations in interest rates and inflationary trends leading to increased volatility in financial and commodity markets
- Audit firm-wide risks, such as from increased staff turnover and risks arising from auditing in a remote audit environment
The overview notes the following specific areas for planned inspection focus:
- Procedures to address fraud and other risks arising in the current economic environment
- How financial reporting and audit risks have been addressed for IPOs (both traditional and SPAC formats), with a specific focus on valuation
- How staffing challenges have been addressed for the necessary skills needed for the audit
- Procedures undertaken to address fraud risks for broker-dealers
- Independence, including but not limited to where non-audit services have been provided and communications with audit committees
- Procedures for maintaining control over confirmation requests and responses (where service providers have assisted with the electronic confirmation process)
- Critical audit matters
- Audit areas with continued deficiencies, such as revenue recognition, allowance for loan losses and internal control over financial reporting
- Compliance with quality control standards
- In relation to technology, whether auditors have the appropriate knowledge and skills to efficiently and effectively use new technologies, as well as specific areas such as auditing digital assets, the auditor’s responses to cyber threats and how auditors are using data and technology within the audit
The Overview also highlights other key reminders for auditors, including but not limited to consideration of the economic impacts from, and developments relating to, the war in Ukraine.
