backPCAOB inspectors outlined their priorities for 2024 inspections in a staff report published on December 20th. The report highlights key risks, e.g., high interest rates, among others, and identifies the 2024 inspection considerations including, broker-dealers, audit areas with recurring deficiencies, evaluating audit evidence, understanding the company and its environment, use of other auditors, going concern, and critical audit matters. The PCAOB said auditors should focus on the key risks and inspection considerations when planning and performing audit procedures. The report notes that the PCAOB will continue to prioritize inspections of financial services sector audits and digital assets, and will check how auditors responded to shifting interest rates and their clients’ classification of held-to-maturity assets, among others risks that could alter a financial institution’s access to capital.
Relatedly, the report highlights the “significant disruption” faced by regional banks in 2023, and notes that the “failure of an auditor to properly understand the business and management’s strategy degrades the ability to appropriately and diligently exercise professional skepticism and professional judgment.”
Other Board priorities include (i) how auditors considered cybersecurity risks in the audit and how they responded to any cybersecurity breaches that require disclosure under new SEC rules; (ii) technology company audits and how auditors responded to fraud risks related to revenue and supply chain pressures; (iii) increasing the number of audits selected for scrutiny among annually inspected firms; and (iv) interviewing auditors as part of an assessment of the culture and leadership of the largest six firms, the findings of which will be published.
The PCAOB’s report is available here.