PCAOB May Drop Some Firms That Have Registered

The Public Company Accounting Oversight Board (PCAOB) may drop some of the nearly 1,000 accounting firms that do not audit public companies or broker-dealers, yet have registered with the board, Accounting Today reported. “Currently 923 firms are registered with the PCAOB even though they do not conduct audits that would subject them to mandatory PCAOB registration,” said PCAOB member Jeanette Franzel in a speech at the Association of Government Accountants’ Annual Professional Development Conference in Dallas July 17. “The board is examining the extent of this practice and the risks that may arise from gaps in expectations about what a PCAOB registration may signify.”

As Compliance Week reported, “Smaller firms have been known to tout their PCAOB registration as if it represents some kind of seal of approval, even when the PCAOB takes no action related those the firms until or unless they perform audit work in the capital markets that falls within the PCAOB’s authority.”

Franzel also said in her speech that based on 2012 year-end data, the Big Four and their global affiliates audited more than 98 percent of the global market capitalization of U.S. issuers. While the concept of mandatory auditor rotation appears dead for now, the PCAOB hopes to address the problems it is seeing among audit firms.

“For the large firms, the number of serious audit performance deficiencies we reported spiked in our 2010 inspections, and remained high overall for the large firms in the 2011 inspections,” Franzel pointed out. “We are starting to see some limited improvements in the 2012 and 2013 inspections.”

She added, “If we see significant improvements in the level of compliance with PCAOB professional standards on audits, the Board will have an opportunity to consider adjusting its inspection approach and methodology to take advantage of firms’ more effective compliance approaches.”