Accounting
PCAOB finds audit firm culture impacts quality
The Public Company Accounting Oversight Board is providing guidance on how audit firm culture can contribute to audit quality, along with insights for auditors on improving audit committee communications and a video on the new confirmation standard.
In a
“Indeed, an audit firm’s culture contributes to the audit firm’s ability to deliver a quality audit,” said the report. “Culture may also detract from audit quality, particularly if leadership says one thing but rewards another.”
The report also found a correlation among centralization, standardization and audit quality. The amount of centralized and standardized processes, tools and templates at the audit firms can help ensure consistent application and promote audit quality. The PCAOB staff found that audit firms with cultures marked by more centralization and standardization seem to have fewer deviations in their procedures nationally, along with fewer deficiencies.
A remote or hybrid work environment can affect audit firm culture. The audit firm partners interviewed for the report suggested that the pandemic and the remote or hybrid work environment impacted the audit firms’ apprenticeship model for on-the-job training, dissemination of culture, and professional skepticism.
Audit firms need to promote a culture of accountability to support audit quality, according to the report. Negative audit quality events, such as internal and external inspection deficiencies, restatements and independence violations, at some audit firms aren’t sufficiently evaluated or attributed to firm personnel. There’s a lack of timeliness of performance evaluations at some audit firms, with negative events being considered the following year instead of the current year.
Some of the audit partners surveyed had concerns about the competency of certain firm personnel and the appropriateness of how engagements at the firm are staffed. The respondents expressed concern that the push for use of shared service centers is removing foundational skills and experiences from firm personnel. That could call into question the use of so-called “Centers of Excellence” at some firms.
Audit leadership seems to be sending mixed messages. Some of the survey respondents indicated that audit firm leaders send mixed messages to the line partners and other personnel about the incentives and penalties for audit quality events. In their view, audit firms need to ensure the factors that drive adjustments to partner compensation align with behaviors that promote audit quality and are clearly communicated to employees at the firm.
“The PCAOB continues to be concerned about recent trends in audit quality as reflected in the overall deficiency rates in our recently published inspections reports,” said the report. “Sustainable improvements in audit quality are needed.”
Audit committee communications, confirmations
Separately, the PCAOB released Wednesday a
Some of the problems seen by the PCAOB staff relate to required communications, such as auditors not communicating to audit committees all the critical accounting policies and practices used by the company.
On the positive side, the staff pointed to some good practices related to audit committee communications, such as using structured templates and providing guidance on completing those templates.
Separately, the PCAOB staff posted a
DSB Rock Island merges with fellow Minnesota firm Meuwissen, Flygare, Kadrlik and Associates; Smith + Howard adds Richmond-based consultancy Fahrenheit Advisors; Reynolds, Bone & Griesbeck adds fellow Memphis firm Scott and Pohlman; and GBQ expands its credit union practice with Lillie & Co.
AI-specialized accounting platform company
“We’re putting every dollar back into the platform and team – to invest in ML research, to continue to bring the most cutting-edge AI to accounting firms, and to open additional slots for firms,” said Matt Harpe, Basis co-founder, in an email.
Basis, which emerged from stealth
“This technology is a new paradigm for accounting. Learning to work with your computer, not just on it, might be an even bigger shift than going from paper to digital. Over the last year, as accountants have experienced what’s possible with the most cutting-edge AI, we’ve seen more and more firms decide that AI must become the top strategic priority. We’re excited to continue to equip firms with AI that actually works,” said Mitch Troyanovsky, Basis co-founder in an email.
Basis sells exclusively to accountants versus selling directly to businesses or building ‘new’ accounting firms, and is tailored specifically for use by expert accountants. Basis focuses on building agents that understand, and can operate on, accounting broadly instead of isolating only a specific task. This allows Basis to work across clients and workflows without losing context, and to quickly take on new workflows, said Basis. Accountants onboard Basis to engagements and assign it core workflows for one-time or ongoing execution
“Accounting is a massive industry, and Basis is clearly leading on the AI side. This is one of the few AI agents that’s already deployed and working. Matt and Mitch have put together the best NYC team in the applied AI space,” said Vinod Khosla, founder of Khosla Ventures, who also co-founded Sun Microsystems.
Platform Accounting Group has added two more accounting firms, based in Indiana and Illinois, bringing the total firms that have joined the Utah-based company this year to 12.
Platform Accounting Group, founded in 2015, invests in and acquires small accounting firms, and announced it
Midwest Advisors, formerly known as Philip+Rae & Associates, is headquartered in Naperville, Illinois, and has provided fractional CFO roles, controllership and back-office accounting operations for more than 30 years. Additionally, the firm offers tax preparation, accounting and auditing, financial planning, estate planning, payroll services, small business consulting, bookkeeping, back-office accounting, small business consulting and more.
In operation for 30 years, Indianapolis-based Crossroads Advisors, formerly Peachin Schwartz + Weingardt, serves high-net-worth individuals, closely-held businesses and not-for-profit organizations. The firm supports clients throughout their life cycle, from the startup phase to mature businesses seeking an exit or succession strategy.
“Because of my experience and time there, I deeply value the tight-knit community and small-town feel of the Midwest,” said Reyes Florez, CEO of Platform Accounting Group, in a statement. “We are thrilled these firms, who like us, prioritize relationships and roots, are joining our group and will be able to invest even further in their clients and communities.”
Platform Accounting Group has nearly 1,000 employees across 12 states and expects to add a few more accounting firms in January, the company said.
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