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The top of the US audit regulator has warned that hybrid working and offshoring could undermine the standard of accounting firms’ work.
Erica Williams, chair of the Public Company Accounting Oversight Board, told accountants at a conference in Washington on Tuesday that a breakdown of the standard apprenticeship model risked causing problems that may haunt auditors throughout their careers.
Her warning got here after the PCAOB published a report on audit firm culture, which it commissioned a 12 months ago after becoming concerned a few leap in deficiencies in audit work inspected by the agency.
“Once we see deficiencies across a wide selection of audit areas, we begin to wonder if the firm’s culture is promoting and prioritising the skilled scepticism and care that’s required to perform an audit,” Williams said on the Association of International Certified Skilled Accountants event.
“Those we interviewed told us that the distant and hybrid work environment impacted their apprenticeship model for on-the-job training, the dissemination of culture, and skilled scepticism.”
Williams also singled out a trend towards sending basic audit work to offshore or centralised “shared service centres”. Some people at audit firms interviewed for the PCAOB report said “the push for the usage of shared service centres is removing foundational skills and experiences from firm personnel”, she said. “This lack of experience in basic audit skills may lead to additional difficulties as those individuals proceed on of their careers.”
PCAOB inspectors have found flaws in greater than two-fifths of the audits they examined in each of the past two years, which Williams has previously suggested might have been caused — but which shouldn’t be excused — by disruptions from the pandemic.
On Tuesday, she said that this 12 months’s inspections would show a big improvement, and she or he defended the work of the PCAOB from those that have criticised it for taking too aggressive a stance against the career. Under her leadership, the agency has imposed more fines than ever on audit firms, and has written tougher recent audit standards which have sometimes been opposed by the Big 4 firms.
President-elect Donald Trump is predicted to usher in a lighter touch across US regulatory agencies on returning to the White House in January, and has nominated a longtime PCAOB critic, Paul Atkins, to chair the Securities and Exchange Commission, which oversees the agency. Some critics have even argued that some or the entire PCAOB’s work must be transferred to the SEC.
“The PCAOB and the SEC share a standard mission of protecting investors, and I feel that investors are best protected when each of us bring our unique resources and expertise to the table,” Williams said.
