PCAOB: Too Many Auditors are Cutting Corners

Public companies expect third-party audits to be thorough and accurate. Many aren’t getting the results they expect.

The Public Company Accounting Oversight Board (PCAOB) is back with its annual report on broker and dealer (B&D) audits. The board reviewed compliance reports and exemption reports for 60 randomly selected auditing firms in 2023 (in previous years, PCAOB evaluated 50 auditors annually). The results are troubling, to say the least:

• at least one deficiency was detected in 70% of 103 audit engagements on B&D financial reports, up 58% from 2022, and
• deficiencies in evidence to support opinions in 56% of audits. The problem areas, in order, were revenue, evaluation of audit results and net capital.

Companies that rely on auditors to stay in compliance with financial laws and regulations are often forced to pay for re-dos, and run the risk of attracting unwanted scrutiny from the Securities & Exchange Commission (SEC). PCAOB is responsible for inspections of and setting standards for SEC-registered B&D auditors.

PCAOB Chair Tells Auditors to ‘Step it Up’

Good accountants who can run error-free audits are always in demand but perhaps never more so. Fewer and fewer college students are choosing to take the certified public accountant (CPA) exam. They’re choosing more lucrative finance avenues instead.

State regulatory boards are aiming to reduce the time and costs of acquiring a CPA license to sweeten the pot. Students frequently complain about the 150 credit hour requirement to sit for the CPA exam.

Meanwhile accounting errors are spiking: About a third of accountants make multiple errors every week and 59% percent goof up on a monthly basis, according to a Gartner study from earlier in the year. Accountants point to all of the new regs passed by the feds and in heavily-regulated states like California.

PCAOB chair Erica Williams dismisses accounting industry groups’ concerns that they’re stretched too thin. She instead blames the error rates on sloppiness and a lack of attention to detail. “I have challenged auditors to sharpen their focus and called on audit committees to hold firms accountable,” she told board members last year.