On December 21st, long after most people had given up on the world coming to an end and just about the time everyone on the east coast was about to check out for the rest of 2012, the PCAOB conveniently released the 2011 inspection reports for Deloitte, Grant Thornton, and Ernst & Young. The timing of the release gave us all a good laugh and not surprisingly, resulted in very little attention in the press. Nevertheless, learning how poorly auditors are auditing (or alternatively, how aggressively inspectors are inspecting) is of great interest to many.*
To: All Audit professionalsThrough your unrelenting focus on the Audit Imperatives, we have seen significant improvement in the quality of our public company audits. Thank you for your efforts – they are yielding great results.
While we should take pride in what we have accomplished, we must continue to build on the progress we’ve made.
Professional skepticism is an area of significant focus for our regulators and the investing public. It is at the heart of our work and is fundamental to the performance of all aspects of every audit. It is the responsibility of each individual auditor to appropriately apply professional skepticism, and to document the related thought processes, throughout the audit.As auditors, we must act as evaluators with an attitude of professional skepticism in order to fulfill our responsibilities to investors, lenders, and other users of the financial statements; this means we need to keep our focus on driving both the PCAOB FY13 Audit Imperatives and the AICPA FY13 Audit Imperatives, including appropriately applying professional skepticism on all of our audits – for both public and non-public (private) entities.
In order to build on our progress in delivering quality audits and our commitment to professional excellence, it is important that we devote time to the important topic of professional skepticism – as professionals and as a practice. Accordingly, we are asking that all audit professionals (staff through P/P/D) take the following steps:1. Read PCAOB Staff Audit Practice Alert No. 10Published on December 4, Staff Audit Practice Alert No. 10: Maintaining and Applying Professional Skepticism in Audits reminds us of the importance of exercising professional skepticism.2. Read Martin Baumann’s December 4th speech (delivered at the 2012 AICPA Conference on Current SEC and PCAOB Developments)Baumann, PCAOB Chief Auditor and Director of Professional Standards, discusses Staff Audit Practice Alert No. 10 and emphasizes the importance of professional skepticism in his speech at the 2012 AICPA Conference on Current SEC and PCAOB Developments.3. Reread our Professional Skepticism Practice Aid4. Complete a short required assessment focused on the key concepts emphasized in the above materialsNote: you may also access all these materials on DeloitteAudit Plus.You are requested to complete the required reading and assessment as soon as possible, but no later than January 15. If you have any questions, please contact National Office (Audit Consultations).While we recognize that fulfilling the requirements noted above will take time in what are already busy schedules, given the importance of this subject and its pervasive impact to our audit engagements, we are asking you to devote the approximately 60 minutes that it will take to complete this important exercise.As you complete these requirements, please take the time to reflect on your own engagements and how improvements in the exercise of professional skepticism can lead to improved quality on our audits.Thank you for all you do each day to support our efforts in leading the profession. You should be proud of what you have accomplished and of your role in delivering quality to the capital markets, investing public, other users of our client’s financial statements and our clients.