The Public Company Accounting Oversight Board (“PCAOB”) was established by congress in 2002 to oversee auditors of public companies. The law stipulates that the PCAOB inspect auditor firms’ performances and their quality control systems regularly to make sure they follow the standards that the PCAOB set up.
For the auditors of public companies, the PCAOB implements a risk-based approach to assess audit engagements. The inspection uses high-risk samples to evaluate an auditing firm instead of random samples. There are some criticisms about this risk-based approach. For example, this method may not represent a firm’s average audit quality since it focusses on some difficult audits (Church and Shefchik, 2012). However, I think it is fair from …show more content…
This part talks about some important issues about Deloitte’s audit performance and criticizes its quality control system. Performance principles are important for an audit firm since it needs to provide reasonable assurance that there is no material misstatement in financial statements. For instance, an audit firm should obtain sufficient and appropriate audit evidence in an audit engagement; should design a proper audit plan when performing an audit. However, the PCAOB does not like the way Deloitte run its business. The Board points out some of Deloitte’s mistakes directly which will have negative effects on its business when the report becomes public. Although Deloitte is one of the Big Four firms that does business with different people all over the world, the company may lose their customers and experience serious economic losses when the Board says it has a bad audit performance. For example, its clients may find a new audit firm or require it to lower audit fees. In addition, Deloitte has to put a lot of effort into improving its quality control system. It will take the company’s much time and money to address these
For the auditors of public companies, the PCAOB implements a risk-based approach to assess audit engagements. The inspection uses high-risk samples to evaluate an auditing firm instead of random samples. There are some criticisms about this risk-based approach. For example, this method may not represent a firm’s average audit quality since it focusses on some difficult audits (Church and Shefchik, 2012). However, I think it is fair from …show more content…
This part talks about some important issues about Deloitte’s audit performance and criticizes its quality control system. Performance principles are important for an audit firm since it needs to provide reasonable assurance that there is no material misstatement in financial statements. For instance, an audit firm should obtain sufficient and appropriate audit evidence in an audit engagement; should design a proper audit plan when performing an audit. However, the PCAOB does not like the way Deloitte run its business. The Board points out some of Deloitte’s mistakes directly which will have negative effects on its business when the report becomes public. Although Deloitte is one of the Big Four firms that does business with different people all over the world, the company may lose their customers and experience serious economic losses when the Board says it has a bad audit performance. For example, its clients may find a new audit firm or require it to lower audit fees. In addition, Deloitte has to put a lot of effort into improving its quality control system. It will take the company’s much time and money to address these