Jen: This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemanski, and I’m back again with Miriam Rouziek, an Audit Manager and one of the faces of the PKF Texas SEC team. Miriam, welcome back to The Playbook.
Miriam: Thanks for having me, Jen.
Jen: So, we’ve been talking a little bit about PCAOB, which is the Public Company Accounting Oversight Board, and we’ve been talking about some changes that they’ve had. But what inspection trends are you seeing?
Miriam: One of the inspection trends that’s going to be continuing from 2018 is their focus on internal controls, and especially how auditors are auditing internal controls. They’re going to be looking at how management is remediating any issues with control. This would be any errors or deficiencies, and the controls management sets out to prevent fraud and errors in the financial statements. The PCAOB is really concerned with that, especially around things like cybersecurity and some of the other fraud issues that have been impacting larger public companies and trickling down into smaller public companies.
That’s also an SEC focus, but now the PCAOB is focusing on how auditors are going to be looking out for that as well. One of the other things that the PCAOB is looking at is how auditors use a specialist. A lot of times, a company will use a specialist, such as a reserve engineer or a valuation specialist as part of their procedures in coming up with a value for their assets. The PCAOB is going to look into how auditors use that specialist but also how an auditor might use their own specialist as part of audit procedures. How they manage the specialist, how they do oversight, because the auditor is really in charge of the audit. They can’t just hand it over to a specialist.
Jen: Exactly. So, anything else that’s coming up?
Miriam: One of the other things that’s going to come up is new inspections where they’re looking at how CPA firms have a quality control system. That includes things like partner, or director review, how they train their staff, document retention, whether or not they’re keeping track of their internal trainings… those kinds of things are very important to the PCAOB. It’s not just how they perform an audit but how they work as a company.
Jen: Perfect. We will get you back to talk a little bit more about that soon.
Jen: For more about this topic, visit PKFTexas.com/SECDesk. This has been another Thought Leader Production, brought to you by PKF Texas – The Entrepreneur’s Playbook. Tune in next week for another chapter.