PCAOB Issues Staff Report on Audit Culture

Earlier this month, the US Public Company Accounting Oversight Board (PCAOB) released a staff report on audit firm culture, offering insight into how auditors can ensure their culture is supportive of good professional conduct and audit quality.

"Culture is crucial at audit firms, since it lays the foundation for the work auditors perform in our capital markets," said PCAOB Chair Erica Y. Williams. "Audit firm leaders can and should leverage the insights in our staff report to double down on their efforts to create cultures that reward integrity, accountability, and strong performance of audit work."

In late 2023, the PCAOB launched a review into the relationship between audit firm culture and audit quality. Through this initiative, PCAOB staff conducted interviews, analyzed inspection results, and reviewed documents related to governance, leadership, engagement performance, and communication. The review found that audit firm culture drives audit quality, for better or worse.

The PCAOB also provides suggestions for areas firms may focus when looking to develop a culture that is supportive of better audit quality:

• Centralize and standardize processes, tools, and templates;
• Consider how hybrid and remote environments impact culture;
• Promote a culture of accountability;
• Ensure that auditors possess foundational skills; and
• Develop consistent messaging, incentives, and penalties around audit quality.

Last year, Starling published "Renal Failure: A Crisis in Audit Culture?," a Deeper Dive report into global concerns surrounding audit quality and professional conduct. Therein, we discuss the efforts of regulators, including the PCAOB, to reform audit quality and governance.