The Public Company Accounting Oversight Board (PCAOB) has issued an alert to warn auditors of a significant number of audit deficiencies observed in the past three years in internal control over financial reporting (ICFR).
In December 2012, the PCAOB inspected 309 integrated audit engagements dating from 2010 and found that in 15% of the cases firms failed to obtain sufficient audit evidence to support their opinions on the effectiveness of internal control due to one or more deficiencies.
In today’s alert, the PCAOB said that in subsequent years inspections have continued to identify similarly high levels of deficiencies in audits of internal control.
The alert focuses on a number of issues including the auditors’ risk assessment and the audit of internal control, as well as selecting controls to test and testing management review controls.
PCAOB chief auditor and director of professional standards Martin Baumann said: "It is particularly important for the engagement partner and senior engagement team members to focus on these areas and for engagement quality reviewers to keep these matters in mind when performing their engagement quality reviews."
He added that firms should consider if additional training of their auditing personnel is needed. "Appropriate application of the top-down, risk-based approach pursuant to PCAOB standards can result in an effective audit of internal control while avoiding unnecessary work," he said.