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The head of the US audit regulator has warned that hybrid working and offshoring could undermine the quality of work at accounting firms.
Erica Williams, chairwoman of the Public Company Accounting Oversight Board, told accountants at a conference in Washington on Tuesday that a break from the traditional apprenticeship model risked causing problems that would haunt auditors throughout their careers.
His warning came after PCAOB released a report on the culture of audit firms, which it commissioned a year ago after becoming concerned about a rise in deficiencies in audit work inspected by the agency.
“When we see deficiencies in a wide range of audit areas, we begin to question whether the company’s culture is promoting and prioritizing the professional skepticism and care required to perform an audit,” Williams said at the International Association event. of Certified Professional Accountants. .
“People we interviewed told us that the remote and hybrid work environment impacted their learning model on on-the-job training, culture diffusion, and professional skepticism.”
Williams also highlighted a trend toward sending basic audit work to centralized or offshore “shared services centers.” Some people at audit firms interviewed for the PCAOB report said that “the push to use shared service centers is removing critical skills and experiences from firm staff,” he said. “This lack of experience in basic audit skills could create additional difficulties as these individuals continue their careers.”
PCAOB inspectors have found flaws in more than two-fifths of the audits they examined in each of the past two years, which Williams previously suggested could have been caused, but should not be excused, by pandemic disruptions.
On Tuesday he said this year’s inspections would show significant improvement and defended the PCAOB’s work from those who have criticized it for taking too aggressive a position contrary to the profession. Under his leadership, the agency has imposed more fines than ever on auditing firms and drafted new, tougher auditing standards that the Big Four firms have sometimes opposed.
President-elect Donald Trump is expected to usher in lighter contact with U.S. regulatory agencies upon returning to the White House in January, and has nominated a longtime PCAOB critic, Paul Atkins, to chair the Securities and Exchange Commission. Securities, which the agency supervises. Some critics have even argued that some or all of the PCAOB’s work should be transferred to the SEC.
“The PCAOB and the SEC share a common mission of protecting investors, and I believe investors are best protected when each of us brings our unique resources and expertise to the table,” Williams said.