The Public Company Accounting Oversight Board (PCAOB) (Case Study Sample)

Student’s Name Instructor’s Name Course Date The Public Company Accounting Oversight Board (PCAOB) The public company accounting oversight board is mainly used in implementing a risk-based program to evaluate the public companies auditors. The program was introduced to help in inspecting issuers audit engagements and the accounts which entail such engagements. These include the engagements which pose the highest risks to the capital market. After the oversight board has carried out its inspection, it releases a report which outlines the deficiencies found in the audit engagements while excluding the name of the specific issuer of the engagements which were being investigated. The aim of analyzing the PCAOB process is to understand their inspection process and the framework which has been provided by the GAAP. There are many auditing firms which carry out their tasks but misapply the GAAS and GAAP, and most of their applications have a problem with the quality control systems. The above-mentioned issues can be noted from the PCAOB report issue date was 08/15/2012 (KPMG), the PCAOB report issue date was 12/18/2012. (BDO USA LLP) and PCAOB report issue date was 06/28/12. PCAOB Report Issue Date Was 08/15/2012. (KPMG) In the year 2012, an inspection was carried out by the PCAOB on the registered public counting firm KPM LLP as per the requirement by the Sarbanes-Oxley Act of 2002. The inspection had been designed, and inspections were performed with the aim of providing the basis which would be used in assessing the degree of compliance by the company to the applicable requirements which have relations to the audit issuers. During the inspection, reviews of aspects of 48 audits were included and reviewed. More so, its audit works on two other issuer audit engagements in which the firm was a major player but not the principal auditor. During the inspection, there were certain matters that the team considered as deficiencies in the performance of the target work that it reviewed “Inspection of KPMG LLP”. Most of the deficiencies identified relate to the audit aspects of the financial statements from the issuers which they have announced to restate after the primary inspections procedures have been put in place. Most of the failures noted indicated that the audit firm failed to obtain sufficient audit evidence which they would use to support their opinion. The deficiencies noted in inspections in which the firm was not the principal auditor also indicated that the firm did not obtain sufficient evidence to have its objectives fulfilled. The main deficiencies included; The main deficiencies which were identified indicated misstatements which exceeded established level of materiality by the firm. The audit firm was not able to evaluate clearly whether the control deficiencies were representing material weaknesses individually because it was not able to evaluate the likelihood and potential threat which would result from the misstatements. The oversight board also identified a fraud risk which was relating to revenue recognition. This included the risk which was with respect to the company’s largest client. The fraud represented a significant portion of both total revenue and accounted receivable. According to the report, the firm was not able perform sufficient procedures aimed at testing revenue and related accounts receivables. These include the procedures which were directly responsive to the risk of fraud which had been assesses and which was related to the revenue gained from the issuer’s largest client. There was some contradicting information from the client which the audit firm failed to determine and assess the business rationale of specific structures of operations. More so, the firm was not capable of sufficiently evaluate the severity of identified control of deficiencies while it concluded that the identified deficiencies were not material weaknesses. The PCAOB Report Issue Date Was 12/18/2012 The PCAOB carried an evaluation of submissions by BDO USA, LLP on the basis of PCAOB Rule 4009 (a) and a report was given out in the year 2012“BDO USA, LLP”. The main aim of this oversight broad was to offer a report and from its inspections on the basis of the Sarbanes-Oxley Act of 2012. While evaluating the quality of audit work performed by the company, the PCAOB did inspect various elements from the firm which included practices, policies, and procedures that pertain audit performance. The team was more determined on the tone used at the top, the practices used for partner evaluation, admission, compensation, disciplinary and assignment of responsibilities. Other areas observed the independence implications of the service considered as non-audit, alliances, business venture, arrangements, contingent fee, commissions, and personal financial interests. Other considerations include; practice for client acceptance and retention, the inspection program that the firm uses, their consulting, accounting and auditing matters and their supervisions measures. The issues found by the oversight board which pertain its operations include; The firm was not identifying or addressing in an appropriate manner, a departure which was supposed to come from GAAP and that related to a potentially material misstatement and which concerns non-disclosure of related party loans. More so, it was noted that the firm did not perform sufficient audit procedures meant for testing the existence and valuation of investments realized from insurance contract. The oversight board observed that the firm failed to perform sufficient audit procedures which are used to evaluate whether an investee of an issue was considered as a variable interest entity. The oversight board also noted that the audit firm failed to perform sufficient audit procedures meant for testing the valuation of an investment such as a real estate joint venture. They also failed to perform sufficient audit procedures meant for evaluating whether assessing whether the ability of the issuer on continuing as a going concern can be doubted and whether the corresponding failure to assess related disclosures exists. The oversight board also noted that the audit firm failed to perform sufficient audit procedures meant for evaluating on whether the client can account for a business combination. They were less concerned with performing sufficient audit procedures meant for testing the valuation of a long-lived asset and those regarding using the work of audit work form other people. In two audits, the firm failed to perform sufficient audit procedures meant for testing revenue. They also failed to perform sufficient procedures meant for evaluating whether the mineral properties for their clients were impaired. Despite how big or famous the company is, there are some procedures that it has to adhere to. There are measures and rules outlined by the PCAOB which this auditing company has to follow if they will be effective. It is also in order to follow them because they protect the interest of the shareholders. Lake &Amp; Associates CPA’s LLC 2012 The oversight board carried out a research to ensure that they the audit firm did follow the right procedures while carrying out their analysis. The bard ensured that its approach to making inspection is available to many stakeholders and consistent with the legal restrictions place. The inspection team has been designed to identify and address the deficiencies and weaknesses which are related to the way firms do conduct their audits. To ensure that their goals have been achieved, the board offers reviews of various aspects of some audit that have already been selected and ...