Audit Deficiencies Decreasing, but Still High
The analysis, part of the fifth annual Survey of Fair Value Audit Deficiencies by Atlanta CPA firm Acuitas Inc., which examines recent Public Accounting Oversight Board inspections, found that PCAOB inspectors considered almost two-fifths, or 39.2 percent, of the inspected audits for annually inspected firms to be deficient in 2015.
That was down slight from 42.9 percent in 2014 –- the first decrease since Acuitas began its analyses in 2009. The PCAOB accredited the improvement to the use of practice aids, checklists, coaching, support teams, and efforts to monitor the quality of audit work.
Acuitas noted that failures to assess audit risks, test internal controls and test assumptions about underlying information were the cause of most audit deficiencies, but that issues surrounding fair value measurement and impairment engagements accounted for approximately a quarter of all deficiencies.
Fair value measurement deficiencies are growing more common in cases that involve business combinations, Acuitas reported, with the incidence more than doubling from an average of 23.1 percent from 2009 through 2013, to 55.6 percent in 2014.