Dubai Financial Services Authority 2011 Regional Audit Conference

Transcription

1 Dubai Financial Services Authority 2011 Regional Audit Conference 1

2 Introduction George Botic, Deputy Director Santina Rocca, Senior Advisor 2

3 Caveat The views we express are our individual views and do not necessarily reflect the views of the Board, Board members or other staff of the PCAOB. 3

4 Structure of PCAOB Private, non-profit corporation Independent from the accounting profession Under the oversight of the SEC All rules must be approved Contested disciplinary sanctions do not take effect without SEC approval Budget must be approved annually Appoints Board members and has the right to remove Board members for cause 4

5 PCAOB Board Overview There are five Board members, including two who must be or have been CPAs, appointed by the SEC to five-year terms The Board s responsibilities fall into four broad areas Registration of public accounting firms that audit issuers and broker-dealers Inspections of registered public accounting firms Investigations and enforcement The setting of auditing, quality control, ethics, and independence standards for the auditors of public companies and broker-dealers 5

6 Division of Registration & Inspections Overview Division Activities Registration Global Network firms Non-affiliate firms Domestic Non-U.S. Auditors of broker-dealers 6

7 Registration Who is required to register? Firms that prepare or issue audit reports for issuers, brokers, or dealers, or that play a substantial role in the preparation or furnishing of such audit reports What are firms required to file with the PCAOB? Annual reporting Report information such as audit reports issued and disciplinary histories of new personnel Special reporting Reportable events ranging from administrative matters such as changes in a firm s contact information to more substantive matters, including the institution of certain types of legal proceedings against a firm or its personnel 7

8 Registration Statistics Number of firms registered with the PCAOB as of November 7, 2011 Domestic firms 1,499 International firms 906 Located in in 85 countries with largest concentration of firms in India, UK, Australia, China, and Canada 8

9 Inspections - Overview Purpose of an inspection Assess a firm s compliance with the Sarbanes-Oxley Act of 2002, the rules of the Board, the rules of the Securities and Exchange Commission ( SEC ), and professional standards in connection with the firm s performance of audits, issuance of audit reports, and related matters involving U.S. companies, other issuers, brokers, and dealers Primary focus in inspections of issuer auditors Firm s system of quality control and issuer audit engagements performed by the firm 9

10 Inspections - Overview Overview of 2010 inspections Conducted 9 annual firm inspections (all domestic) Reviewed portions of more than 350 audits Conducted 245 triennial inspections (181 domestic and 64 non-u.s.) Reviewed portions of more than 600 audits (including 44 referred work engagements) 10

11 Global Network Firms Focus on quality control mechanisms of large firms that participate in global networks Inspect audit work performed by non-u.s. firms on subsidiaries or other segments of multi-national audit clients ( referred work ) Focus on supervision of work performed by affiliated firms Controls over consultations on accounting and auditing standards Instructions to affiliates Evaluation of affiliates work Encourage firms to identify root causes and address them throughout their global networks 11

12 Non-Affiliate Triennial Firms Inspect approximately 200 firms each year Perform PCAOB-based inspections for approximately 50% of U.S. domestic triennial firms Large number of firms audit less than 5 issuers Scalable inspection approach Issuers with substantially all operations outside the U.S. Staff Audit Practice Alert No. 6, Auditor Considerations Regarding Using the Work of Other Auditors and Engagement Assistants from Outside the Firm issued July 10,

13 International Inspections To date, conducted 301 inspections of non-u.s. firms in 36 jurisdictions International inspections have been successfully conducted jointly with foreign audit oversight regulators in eight countries Australia, Canada, Korea, Norway, Singapore, South Africa, Taiwan, and the UK 13

14 International Inspections Dodd-Frank Wall Street Reform and Consumer Protection Act (enacted in July 2010) Allows the Board to share information with foreign auditor oversight authorities under certain circumstances Agreements Canada Israel Japan Norway Switzerland United Kingdom 14

15 Rule 4010 Reports Describe deficiencies that the Board views as warranting emphasis in a general public report Reports on - PCAOB s 2004, 2005, and 2006 Inspections of Domestic Triennially Inspected Firms October 22, 2007 PCAOB s 2004, 2005, 2006, and 2007 Inspections of Domestically Annually Inspected Firms December 5, 2008 First-Year Implementation of Auditing Standard No. 5, An Audit of Internal Control over Financial Reporting that is Integrated with an Audit of Financial Statements- September 24, 2009 Observations of PCAOB Inspectors Related to Audit Risk Areas Affected by the Economic Crisis September 29,

16 Common Inspection Findings Revenue Fair Value Measurements and Disclosures Financial Instruments Use of pricing services Testing difficult to value or illiquid securities Auditing fair value hierarchy disclosures Non-Financial Assets Goodwill impairment assessments Estimates and Assumptions Internal Controls Going Concern-Considerations Use of the Work of Specialists 16

17 Keeping Current with PCAOB Activities PCAOB website Division of Registration and Inspections information, including final inspection reports Office of the Chief Auditor PCAOB standards and related rules, including interim standards PCAOB proposed standards Staff Questions and Answers Staff Audit Practice Alerts Standing Advisory Group Sign up for the PCAOB Updates service to receive a notification via that briefly describes significant new postings to our Web site at 17

18 Questions 18