[Global Financial Insights] Summary of Key Findings From PCAOB – April 2025

[2025] 175 taxmann.com 441 (Article)

Global Financial Insights is a weekly feature for the Accounts and Audit Module subscribers of Taxmann.com. It provides you with the latest updates on financial reporting and auditing practices from across the globe. Here is this week’s financial update:

1. Summary of key findings from PCAOB April 2025 Inspection Reports and Expanded Reports

The Public Company Accounting Oversight Board (PCAOB) recently released a new set of inspection reports covering a diverse group of global and regional audit firms. These reports, published in April 2025, reflect inspections conducted in 2024 and early 2025 and are part of the PCAOB’s ongoing oversight mission to enhance audit quality and protect investor interests. The inspections assessed firms’ compliance with auditing standards and professional requirements in their audits of public companies, highlighting both strengths and significant deficiencies where applicable.

Across the 20 firms reviewed, the PCAOB identified varying levels of audit quality. Several firms, including Turner Stone & Company, BDO Switzerland, Rosenfield & Co., and Ernst & Young AS (Norway), were found to have major deficiencies in all of their audits inspected. For instance, Turner Stone had deficiencies in all three audits reviewed, one of which resulted in a restated financial statement due to material misstatements. Key issues identified included insufficient evidence obtained in testing revenue recognition, business combinations, and goodwill impairment, as well as failure to appropriately respond to known risks.

Similarly, BDO Switzerland’s inspection revealed pervasive deficiencies in areas such as revenue, inventory, and internal control over financial reporting (ICFR). All three audits reviewed by the PCAOB were found deficient, with concerns including the failure to evaluate the reliability of audit evidence and the improper assessment of control design. Rosenfield & Co. also had a 100% deficiency rate in its audits, with the PCAOB highlighting lapses in auditing revenue transactions, certain long-lived assets, and the adequacy of supporting documentation.

In contrast, a number of firms demonstrated improvements or maintained strong audit quality with no identified Part I.A deficiencies. These include PwC Germany, PwC Spain, PwC Chile, Smolin, Lupin & Co., Harper & Pearson, Caron & Bletzer, Fischer Cunnane, and Olsen Thielen. These firms generally received clean inspections, with PCAOB reviewers finding sufficient evidence to support audit opinions and no significant lapses in compliance with PCAOB standards. Common audit areas reviewed included investment securities, revenue recognition, and goodwill assessments.

BDO Australia and BDO China, however, continued to show areas of concern. BDO Australia’s audits contained multiple deficiencies across revenue and estimates. BDO China had unsupported opinions in audits related to inventory, cash balances, and revenue, echoing findings from prior years.

Firms such as Assure CPA and Ham Langston & Brezina also had notable deficiencies. Assure CPA failed to obtain sufficient appropriate audit evidence in areas including long-lived assets and revenue, while Ham Langston was flagged for inadequate documentation in audits involving equity-related transactions and investment securities.

Notably, many of the reviewed audits focused on complex or high-risk financial areas. Common areas scrutinised across firms included revenue recognition, goodwill and intangible asset valuation, inventory, internal controls, and use of other auditors. These areas remain central to PCAOB inspection programs due to their historical susceptibility to errors or misstatements and the reliance investors place on accurate financial reporting.

In summary, the latest round of inspection reports underscores the PCAOB’s continued emphasis on audit quality in key risk areas. While several firms demonstrated strong performance and compliance, others exhibited recurring and material deficiencies that will likely require enhanced remediation efforts. The reports also emphasise the importance of effective internal quality control systems, auditor independence, and the need for more rigorous execution of professional skepticism and audit documentation practices.

Source – The Public Company Accounting Oversight Board

2. IAASB and IESBA issue FAQs to support the implementation of ISSA 5000 and IESSA

On June 11, 2025, the International Auditing and Assurance Standards Board (IAASB) and the International Ethics Standards Board for Accountants (IESBA) jointly released a staff publication titled Frequently Asked Questions: Sustainability Assurance Engagements – ISSA 5000 and the IESBA Code. This publication is designed to support the effective implementation of two recently issued and interoperable global standards: the International Standard on Sustainability Assurance™ (ISSA™) 5000, titled General Requirements for Sustainability Assurance Engagements, and the International Ethics Standards for Sustainability Assurance™ (IESSA™), incorporated as Part 5 of the IESBA Code of Ethics.

The FAQs address practical aspects and common queries about applying ISSA 5000 and the IESSA, particularly around ethical requirements, determining relevant components (e.g., group and value chain components), the use of other practitioners or experts, and transparency in assurance reports. They emphasise how practitioners should interpret and comply with the general requirements in ISSA 5000, ensuring a consistent and globally aligned approach to sustainability assurance.

Importantly, while the FAQs serve as guidance, they do not override or replace the authoritative text of ISSA 5000 or the IESSA. Instead, they offer illustrative examples and clarifications to help practitioners navigate the new standards in practice.

For further details, please refer to the attached FAQ document – Joint-IAASB-IESBA-FAQs-on-Sustainability-Assurance

Source – International Auditing and Assurance Standards Board

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