Attention FAE Customers:
Please be aware that NASBA credits are awarded based on whether the events are webcast or in-person, as well as on the number of CPE credits.
Please check the event registration page to see if NASBA credits are being awarded for the programs you select.

PCAOB Issues Annual Report, Documenting Year in Transition

Ruth Singleton
Published Date:
Apr 15, 2022

PCAOB 240x240

The Public Company Accounting Oversight Board (PCAOB) has issued its 2021 annual report, documenting its inspection outcomes during a year of leadership transition and continued adaptations to the COVID-19 pandemic. 

In her opening message, Chair Erica Y. Williams wrote, “In 2021, the PCAOB faced changes and transition, including the continuing challenges of the COVID-19 pandemic, high-profile developments in the capital markets, and ongoing technological evolution in auditing. The leadership of our organization also changed with the appointment of four new Board members in November.” 

The Securities and Exchange Commission (SEC) removed the previous chair, William D. Duhnke III, in June 2021, and it approved Williams as chair in November 2021, along with three new board members: Christina Ho,  Kara M. Stein and Anthony C. Thompson. Ho and Stein were sworn in in that month, and Williams and Thompson were sworn in in January 2022. Duane DesParte, who was acting chair during the transition from Duhnke to Williams, is the only remaining board member from a year ago.  

According to Accounting Today, the PCAOB has come under pressure to step up its enforcement efforts. That’s one reason why the SEC dismissed most of the previous board.  

The report said that the PCAOB conducted 191 inspections of audit firms in 2021, and it reviewed 782 unique engagements. Fifteen individuals and 14 audit firms were sanctioned, and the PCAOB issued 21 settled disciplinary orders. Fourteen orders involved U.S. auditors and seven involved non-U.S. auditors. Five orders involved the six largest global accounting firm networks, and 16 involved smaller firms. 

The report also laid out the board’s actions in response to the pandemic: “We designed our 2021 inspection program to respond to the effects of the COVID-19 pandemic on financial reporting and audit risks. We adapted our program in several key ways. … First, we selected more audits for review in industries experiencing significant disruptions or elevated risks during the pandemic, such as transportation, entertainment, hospitality, manufacturing, certain aspects of the retail segment, and commercial real estate (including real estate investment trusts). Second, we focused on certain financial statement items and other reporting matters that were affected by the pandemic, including going concern assessments, allowances for loan losses, impairments, and the increased risk of fraud. Finally, we enhanced the unpredictability of our inspections by (1) significantly increasing the percentage of audits we select randomly, especially for the largest audit firms, and (2) selecting more nontraditional financial statement focus areas (e.g., cash) for inspection.” 

The report also mentioned the PCAOB’s responsibilities under the Holding Foreign Companies Accountable Act. “Following a proposal and request for comment issued in May 2021, we adopted a new rule in September 2021 related to the PCAOB’s responsibilities under the Holding Foreign Companies Accountable Act (HFCAA),” the report said. “The rule provides a framework for the PCAOB to use when determining, as contemplated under the HFCAA, whether the Board is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction. Following the SEC’s approval of the rule in November 2021, the Board made its first HFCAA determinations in  2021, finding that the PCAOB is unable to inspect or investigate completely registered firms headquartered in mainland China and Hong Kong.” 


Click here to see more of the latest news from the NYSSCPA.