Tag: auditor professional skepticism

SEC Chief Accountant urges focus on professional skepticism and audit quality

SEC Chief Accountant Paul Munter has posted a new Statement.  What’s on his mind?  Apparently, he is disturbed that, in recent inspections of audits, the PCAOB has reported a “troubling” increase in deficiency rates—meaning the PCAOB found that there was insufficient audit evidence obtained to support the auditor’s opinion.  Deficiency rates went from 29% in the PCAOB’s 2020 inspections to 34% in its 2021 inspections, up now to 40% in its 2022 audit inspections. This, he warned, was a “troubling trendline in PCAOB inspections results”—emphasis again on “troubling.” What does he prescribe?  A “commitment to high-quality audits,” which,  “in turn, calls for the auditor to exercise objective, impartial judgment and rigorous professional skepticism in gathering and evaluating evidence throughout the audit to support the audit opinions provided.”  To be sure, both auditors and audit committees “should pay particularly close attention to areas that have been frequently identified as causes of deficiencies in PCAOB inspections.” In addition, he advises that “auditors should conduct engagements with a mindset that the investors, rather than management, are the audit client.”  This commitment to high-quality audits, he contends, is the only way for auditors to protect the investing public. He offers advice for both auditors and audit committees.