By Ken Tysiac, Journal of Accountancy
PCAOB inspections in 2021 will focus on the effects of the coronavirus pandemic on companies’ financial reporting while also becoming less predictable, according to resources the board published Tuesday.
- As reported previously in the JofA, the board is focused both on pandemic-related audit challenges and a concern that firms may be disproportionately paying attention to areas of audits that are frequently inspected. The PCAOB published resources containing a general staff outlook and guidance for audit committees explaining the 2021 inspections focus.
The PCAOB also revealed that it expects inspections to continue remotely for the foreseeable future because of the pandemic.
Inspectors will select audits for review in industries that are experiencing big disruptions or high risks during the pandemic, such as transportation, entertainment, hospitality, manufacturing, certain aspects of the retail segment, and commercial real estate, including real estate investment trusts.
Inspections will focus on financial statement matters and other reporting matters that have been particularly affected by the pandemic, such as impairments, going concern assessments, allowance for loan losses, and increased risk of fraud.
The PCAOB’s inspectors will evaluate how auditors completed and documented procedures in compliance with auditing standards, considering factors such as:
- Remote work;
- Time constraints;
- Availability of information; and
- Access to public companies’ management.
New PCAOB requirements related to auditing accounting estimates and the use of specialists also will be evaluated.
Pandemic-related risks also have caused the PCAOB to decide to inspect a greater number of audits of custodial broker-dealers in 2021 than in the past.