After analyzing 8 PCAOB inspection reports, I have found 5 common main topics. Deficiencies in Audits of Internal Controls
The most significant deficiencies that I identified in auditing internal controls are the following: * The firm’s failure to sufficiently test the design and operating effectiveness of management review controls, such as their forecasts for revenues * The firm’s failure to test the system-generated data and reports that support vital controls * The firm’s failure to identify and thoroughly test controls that are intended to address risks of material misstatements. By not properly identifying deficiencies in internal controls, the auditor’s would base substantive procedures on a level of reliance of internal control that was excessive. Therefore, internal control deficiencies often contributed to the deficiencies in the firm’s financial statements. In order to improve their internal control audits, the firms should apply an appropriate top-down approach, provide firm training and guidance, and have effective communication with the firm’s information system specialists. Impairment of Goodwill and Long-Lived Assets
Throughout my analysis, I noticed that every report mentioned the auditor’s failure to report sufficient procedures to assess the impairment of goodwill and long-lived assets. The most common reasons for their failure were the following: * The firm did not evaluate reasonableness of revenue growth assumptions when industry standards showed adverse implications * The firm failed to obtain understanding of the key assumptions underlying the measurements Since evaluating impairment of goodwill and assets is very subjective, this account will be very susceptible to deficiencies. Therefore, firms cannot rely solely on inquiry by management. .Firms need to obtain evidence from valuation specialists and perform analytical procedures to compare industry standards to the firm’s. Inventory Valuation
The inventory account...
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