The Public Company Accountancy Oversight Board is singling out new technologies as an area of focus for audit inspections in the coming year.
In its outlook on objectives and potential focus areas for 2019, the PCAOB said staff from its Division of Registration and Inspection would be looking at, among other things, cybersecurity risks, software audit tools, and digital assets such as cryptocurrencies, initial coin offerings, and uses of distributed ledgers.
“Our inspectors will monitor the evolution of new technologies available to companies and auditors that are affecting current and future audits,” the outlook states.
The board noted cyber incidents and breaches of information systems “continue to occur frequently while the complexity of cyber attacks on businesses is constantly evolving. In 2019, we will continue to evaluate the audit procedures firms use to identify and determine whether cyber risks and actual breaches pose risks of material misstatement to companies’ financial statements.”
For digital assets, inspectors’ focus will be on understanding audit firms’ client acceptance and retention decisions, resource management, and planned audit procedures.
“We further will consider whether firms are maintaining their independence while offering new service lines relating to digital assets,” the board said.
The PCAOB also said it will continue to monitor the use and development of software audit tools for audit engagement management, testing procedures, and the use of artificial intelligence. “Throughout 2019, we will … consider whether firms are effectively using these tools and applying due care, including professional skepticism, when they do,” it said.
The board’s inspections are designed to drive improvement in the quality of audit services through a focus on efficient and effective prevention, detection, deterrence, and oversight of audit firms’ remediation of audit deficiencies.
Also on the agenda for inspectors next year are analyzing how audit firms’ systems promote a culture of audit quality and respond to risks; assessing how auditors maintain their independence, in fact and appearance; and evaluating firms’ responses to elevated risks of material misstatement due to external considerations such as economic conditions.