Helping a Newly Registered PCAOB Firm Step Up To PCAOB Audits

Client challenge: PCAOB audit training tailored to auditors of digital assets

Our client, a regional accounting firm in the UK, is a leader in the cryptocurrency, blockchain, and Web 3.0 space. With experience in digital assets, they offer audit, advisory, and other services to companies in this space. In order to help their clients with potential IPOs, they registered with the Public Company Accounting Oversight Board (PCAOB) and were in need of PCAOB audit training.

Newly registered PCAOB firms often struggle to understand the intricate differences between audits performed under U.S. generally accepted auditing standards (U.S. GAAS), International Standards of Auditing (ISAs), and those conducted under PCAOB auditing standards. These first-time PCAOB audit firms need comprehensive training to avoid common audit deficiencies and meet the board’s rigorous auditing requirements, particularly when dealing with audits involving digital assets.

However, our client faced a unique challenge; there was no readily available, off-the-shelf PCAOB audit training and creating it from scratch with in-house personnel was not cost effective.

Our solution: A PCAOB workshop tailored to their unique needs

Working directly with client leaders, we designed a PCAOB workshop specifically tailored to audit firms specializing in digital assets that are “stepping up” to a PCAOB audit from either ISAs or U.S. GAAS. Consisting of six, 2-hour webinars (12 CPE), the PCAOB workshop guided the learners through the critical elements of PCAOB audits, beginning with an introduction to PCAOB audit standards and progressing to complex issues specific to auditing digital asset firms.

Webinar #1: Introduction to the PCAOB and stepping up to PCAOB Audits

After a brief introduction to the PCAOB and their auditing standards, we discussed stepping up to a PCAOB covering topics such as:

• Audit documentation (AS 1215) and audit evidence (AS 1105)
• Consideration of fraud (AS 2401) and the related auditors’ response
• Independence
• Critical audit matters (CAMs)
• Audit committee communications (AS 1301)

Webinar #2: Auditing internal control over financial reporting

Of course the biggest “step up” to PCAOB audits is compliance with AS 2201 An Audit of Internal Control Over Financial Reporting That is Integrated with An Audit of Financial Statements. And it’s also the PCAOB auditing standard associated with the most audit deficiencies noted during PCAOB inspections. After providing an overview of the ICFR, we took a deeper look at:

• Identifying and assessing the risks of material misstatement
• Evaluating the design and implementation of key controls
• Responding to the risks of material misstatement, including testing the operating effectiveness of key controls
• Evaluating control deficiencies and communicating with management

Webinar #3: Use of specialists, including service organizations

In this webinar we discussed the following topics, all very relevant to audits of companies with digital assets:

• AS 1105 Audit Evidence (using a company-engaged specialist)
• AS 1210 Using the Work of an Auditor-Engaged Specialists
• AS 2501 Auditing Accounting Estimates, Including Fair Value Measurements
• AS 2601 Consideration of an Entity’s Use of a Service Organization

Webinar #4: PCAOB inspections and areas of recurring deficiencies

Guess what? On average, 4 out of 10 audits are deficient based on PCAOB inspections, and our client didn’t want to be on the wrong side of that statistic! In this webinar, we discussed best practices for navigating PCAOB inspections along with a deeper dive into the main PCAOB auditing standards contributing to the 40% deficiency rate.

Webinar #5: Auditing issues involving entities with digital assets

As noted by the title, this webinar was all about the special considerations relating to audits of digital assets. We took a deeper dive into the common areas of inspection findings for these firms including:

• Fraud and significant unusual transactions
• Ownership of crypto assets
• Relevance and reliability of information used as audit evidence
• Revenue recognition in crypto asset transfer
• Arrangements with mining pool operators

Webinar #6: Audit update and hot topics

In the final webinar, we spend considerable time walking through the new requirements within QC 1000 A Firm’s System of Quality Control, which will be a significant uplift for most firms. We also discussed the new auditing standards related to group audits (AS 1201 (revised) and AS 1206) and auditor’s use of confirmation (AS 2310). The webinar concluded with a look at recent PCAOB Spotlight documents published by the PCAOB to help firms when conducting audits in accordance with PCAOB auditing standards.

All of our live, instructor-led training, whether delivered in person at their location or via webinar, are facilitated by two expert instructors. And for this training, we brought out the big dogs. We co-facilitated the webinars with former PCAOB inspection leaders. Talk about bringing the right resources to the table!

Their transformation

By the end of the workshop, participants were able to:

• Understand the core differences between ISAs and PCAOB audits, including the additional procedures required for PCAOB compliance
• Identify the unique auditing challenges that engagement teams face when auditing companies in the digital asset industry
• Recognize recurring deficiencies noted during PCAOB inspections and learn how to avoid them
• Implement actionable steps to improve audit quality and reduce the likelihood of deficiencies

This comprehensive, tailored learning solution provided our client with the knowledge and tools to successfully conduct their first PCAOB audits with confidence. They are now well-equipped to deliver high-quality audit engagements in accordance with PCAOB standards, especially in the rapidly evolving digital asset space. Our client is positioned not only to meet regulatory requirements but to exceed them.

And don’t just take our word for it. Here’s the feedback we received from the lead engagement partner that hired us:

The team has really been enjoying the training and all the feedback we have received so far is positive! The training is giving us a good indication of what the world of PCAOB audits will entail as well as giving us refreshers on the audit topics covered.”

After the PCAOB workshop, the firm purchased subscriptions to the Audit eLearning Library for their professionals and here's what the lead engagement partner had to say:

The Audit Library subscription has been invaluable for our team, particularly as we navigate the complexities of U.S. GAAP reporting for our international clients. We've found the technical resources and update materials especially helpful in keeping our team current with the latest standards and interpretations. What particularly impressed us is the quality of the course delivery. The presenters are engaging and clearly have a deep expertise in their subject matter, which comes across in how they break down complicated concepts into understandable segments. The modules are clear, concise and presentations make complex technical content much more digestible. Our team especially appreciates how the material is structured with practical examples and real-world scenarios, which helps bridge the gap between theory and application.”

That's what we are shooting for! If your firm needs assistance in “stepping up” to PCAOB audits with tailored PCAOB audit training (or just needs a refresher to avoid those pesky audit deficiencies), let’s talk!