The PCAOB recently released a new Audit Committee Resource, which sets forth questions that audit committee members may want to consider incorporating into their ongoing engagement with auditors. The categories of questions include fraud and other risks, IPOs and M&A, audit execution, audit firm compliance with auditor independence requirements, audit firm quality control systems, and technology (digital assets, cyber threats and data and technology used in the audit). The questions specifically address audit risks presented by the current economic environment, such as the following examples:
- How have economic factors (e.g., supply chain disruption, inflation) influenced the auditor's risk assessment for the current year's audit?
- Have emerging issues influenced the nature, timing, or extent of procedures the auditor plans to perform to address the risk of material misstatement due to fraud?
- If management made changes to certain accounting policies, practices, or estimates as a result of current events (e.g., higher inflation and costs of capital, the invasion of Ukraine), has the auditor considered how those changes may impact the planned audit strategy?
- If other auditors were used in Russia, Ukraine, or Belarus, were there difficulties in communicating with or assessing the other auditor's procedures? If so, did the lead auditor determine that it was required to develop an alternative plan for supervising or using the work and reports of other auditors?
- How does the lead auditor anticipate handling work going forward that was previously done by other auditors in Russia, Ukraine, or Belarus?
- In the auditor's view, how has staff turnover at the company impacted (1) the quality of the company's accounting and financial reporting processes and internal controls and (2) the company's preparation for the audit?
In addition to the questions in this latest resource, audit committees may also want to consider engaging with their auditors about areas of planned PCAOB inspection focus for 2022 (see PCAOB June 2022 Spotlight) and any audit-related changes that may be prompted by such focus areas.
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