PCAOB: 2023 Inspections to Prioritize Audit Risks Related to Fraud, the Financial Services Sector, Crypto

 – April 17, 2023
PCAOB: 2023 Inspections to Prioritize Audit Risks Related to Fraud, the Financial Services Sector, Crypto

Public Company Accounting Oversight Board (PCAOB) inspectors outlined their priorities for 2023 inspections in a new PCAOB staff report out today. The report outlines plans to increase the focus on fraud-related audit procedures, continue prioritizing risks related to material digital assets, and continue selecting audits in the financial services sector for inspection, among other priorities.

“Increased deficiencies in 2021 inspections and increased comment forms in 2022 inspections revealed a troubling trend in audit quality, which we are tackling head-on in 2023,” said PCAOB Chair Erica Y. Williams. “By staying ahead of new and emerging risks, our inspections plan will hold firms accountable and drive improvements in audit quality for investors.”

Last year, the PCAOB found a year-over-year increase in the number of audits with deficiencies at audit firms that the PCAOB inspected in 2021. Chair Williams said higher deficiency rates in 2021, coupled with increased comment forms for 2022, were a warning signal. She challenged the audit profession to sharpen its focus on improving audit quality and protecting investors.

The complete list of 2023 inspection priorities outlined in today’s report includes:

  • Risk of fraud
  • Auditing and accounting risks
  • Risk assessment and internal controls
  • Financial services specific considerations
  • Broker-dealer specific considerations
  • M&A, including de-SPAC transactions
  • Digital assets
  • Use of the work of other auditors
  • Quality control (particularly talent retention and its impact on audit quality, and independence)
  • Other areas of inspection (critical audit matters, cybersecurity, and use of data and technology in the audit)

Today’s report notes the target team of inspectors, who execute in-depth reviews across audit firms each year, will focus its work in 2023 on audits that include risks related to digital assets, first year audits, multi-location audits, and significant or unusual events or transactions. As part of ongoing efforts to enhance inspections, today’s report also says inspectors will expand the number of audits they review for certain annual firms.