On Dec. 9, the Public Company Accounting Oversight Board (PCAOB) inspectors released a staff report listing their priorities for 2025 inspections. The report outlines the key risks and considerations for auditors and questions for audit committees, among other items. 

“Inspecting audit firms is one of the most important tools the PCAOB uses to protect investors,” noted PCAOB Chair Erica Williams in a release. “We encourage audit firms and audit committees to read this report, which provides timely perspectives to drive improvements in audit quality.” 

The report focuses on the risks and other considerations auditors should take into account when planning and conducting their current and future audits. It also highlights the sectors and industries that PCAOB inspection staff will prioritize next year. Additionally, the report offers a set of recommended questions that audit committees can consider in their oversight role. 

The report also detailed the PCAOB's continued emphasis on selecting audits of public companies that:

• Are in industries and sectors with specialized accounting and/or that might be negatively affected by uncertainties and volatility in the economic and geopolitical environment,

• Are in sectors where inspectors have, in the past, found a more elevated number of deficiencies or 

• Might have a heightened going concern risk. 

Next year, the PCAOB’s selection process will prioritize the financial, real estate and information technology sectors. Inspectors will also focus on public firms affected by supply chain challenges, public companies engaging in mergers and acquisitions transactions or business combinations, broker-dealers that file compliance reports and other broker-dealers that offer customers different investment opportunities, including the introduction of brokers. 

The PCAOB staff intends to continue performing inspections, emphasizing areas posing a heightened risk to audit quality. Areas of inspection emphasis for next year include the following: 

• Audit areas that have experienced execution challenges 

• Audit areas where new auditing standards apply 

• Critical audit matters 

• Audit areas with increased use of technology, such as the utilization of generative artificial intelligence in public firms and broker-dealers 

• Crypto assets 

• Quality control procedures such as independence and client acceptance procedures for firms in alternative practice structures 

• Audit firm culture 

Regarding PCAOB’s 2025 inspections, the report has recommended questions for audit committee members to take into account both among themselves and in discussions with their independent auditors. These questions were mainly created to further two-way communication on topics such as internal control over financial reporting, materiality, auditor utilization of technology, audit evidence and the engagement team's turnover. 

The Spotlight can be found on the PCAOB’s Staff Publications page and other resources meant to foster understanding of the regulator’s and its staff’s activities and observations.