Audit firms have opportunities to improve their cultures of accountability to promote audit quality, according to a new report from the Public Company Accounting Oversight Board (PCAOB).
Based on a comprehensive review, including more than 150 interviews with partners at the largest US audit firms, the report suggests that firm culture impacts on audit quality.
The PCAOB staff initiated an investigation in September 2023 to determine if there was a link between audit firm culture and rising audit deficiencies.
The study involved interviews, analysis of inspection results, and examination of quality control systems, focusing on governance, leadership, engagement performance, and communication.
Findings indicate that audit firms with more centralised and standardised processes tend to have fewer procedural deviations and deficiencies.
The report emphasises the importance of these processes in ensuring a consistent standard of application and promoting audit quality.
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By GlobalDataInterviewees noted that the pandemic and the shift to remote/hybrid work environments affected the traditional apprenticeship model, impacting culture dissemination and professional scepticism.
There were concerns about insufficient evaluation of negative audit quality events and delayed performance evaluations.
Respondents raised issues regarding the competency of firm personnel and engagement staffing. Concerns were also expressed about shared service centres potentially eroding foundational skills and experiences.
Mixed messages from audit firm leaders regarding incentives and penalties for audit quality events were also highlighted.
PCAOB chair Erica Y. Williams said: “Culture is crucial at audit firms, since it lays the foundation for the work auditors perform in our capital markets.
“Audit firm leaders can and should leverage the insights in our staff report to double down on their efforts to create cultures that reward integrity, accountability, and strong performance of audit work.”
Besides, PCAOB introduced three new resources in October to support the implementation of QC 1000, a new quality control standard for accounting firms.
