The Public Company Accounting Oversight Board (PCAOB) has issued new guidance for audit firms regarding the use of specialists in financial reporting and auditing.  

The spotlight report is titled “Considerations for Audit Firms Using the Work of Specialists.” 

This report from the PCAOB inspection staff underscores considerations for registered public accounting firms, that engage specialists in audits of public companies or brokers and dealers. 

This comes as financial reporting frameworks evolve, leading to an increased reliance on specialists due to the prevalence and significance of accounting estimates, particularly fair value measurements. 

The association notes that specialists are increasingly called upon to assist companies in developing accounting estimates or evaluating physical asset characteristics.  

Concurrently, auditors are engaging with specialists’ work to obtain and evaluate audit evidence.  

However, if an audit firm fails to properly oversee or assess a specialist’s work, there is said to be an elevated risk of not spotting material misstatements in financial statements. 

The PCAOB’s goal is to enhance inspections and improve audit quality by providing useful guidance to auditors.  

The latest report covers evaluating company specialists, using auditor-employed specialists, and engaging auditor specialists. 

Additionally, it addresses common deficiencies, reminders for audit firms, and good practices.  

The report also suggests questions for audit committees to consider regarding the audit firm’s use of specialists. 

The report stated instances of lapses observed by the PCAOB’s staff: “The auditor’s risk assessment did not consider information in the annual filings or other available information that is inconsistent with the auditor’s risk assessment and/or the company specialist(s) report.  

“The auditor identified a risk of material misstatement associated with account balances, such as balances reported under fair value, that are estimated using a company specialist but did not perform appropriate control testing and/ or substantive procedures to address the identified risk, including designing and implementing an audit response that addresses the risk.” 

In December 2024, the PCAOB highlighted its inspection priorities for 2025, focusing on sectors such as finance, real estate, and information technology.  

The staff report provided detailed insights into the risks and considerations auditors should factor into their current and future audits.