Call a Spade a Spade: Is there a distinction between PCAOB and AICPA audits?

Firms have a habit of dividing audits between PCAOB/SEC audits and AICPA / private company audits. This permeates methodology, training, staffing, career paths, and honestly, all facets of a firm’s system of quality management. 


I fully acknowledge that there are distinct differences in requirements for a PCAOB audit versus an AICPA audit, especially if the PCAOB audit is integrated under SEC 404 requirements. But let’s also have an honest dialogue and acknowledge that the core audit principles (I’m talking planning and risk assessment, understanding the entity and its controls, and the design of the overall responses to the risks of material misstatement) are VERY similar. 


While 404 may require the testing of internal controls, regardless of the audit opinion or auditing standard, ALL auditors have to understand the company’s processes and controls and evaluate the design and implementation of those controls. The only difference between an integrated and a non-integrated audit is the testing over operating effectiveness of controls. This is true for both PCAOB and AICPA audits. In fact, let’s take a look at the guidance: 


PCAOB: AS 2210.18 and .20 states: The auditor should obtain a sufficient understanding of each component of internal control over financial reporting ("understanding of internal control") to (a) identify the types of potential misstatements, (b) assess the factors that affect the risks of material misstatement, and (c) design further audit procedures…Obtaining an understanding of internal control includes evaluating the design of controls that are relevant to the audit and determining whether the controls have been implemented. 


AICPA: AU-C Section 315.13 and .14 states: The auditor should obtain an understanding of internal control relevant to the audit…When obtaining an understanding of controls that are relevant to the audit, the auditor should evaluate the design of those controls and determine whether they have been implemented by performing procedures in addition to inquiry of the entity's personnel. 


Both PCAOB and AICPA require the same planning procedures. The extent of those procedures will depend on risk and complexity of a client, but the procedures are the same: understand design of controls and determine whether they have been implemented. In fact, the guidance for AICPA indicates that evaluation of design and implementation is more than just inquiry. The PCAOB also states that in controls, inquiry alone is never sufficient. 


If we take a step back, the reason both standards require this understanding of controls is because once an engagement team understands the controls, they can then identify the risks and potential misstatements and from that understanding, appropriately design an audit approach, whether integrated or not. 


Time and again, when helping firms with audit quality, I’ll hear firms say something along the lines of “well, that’s a private company audit, so it’s different.” Is it really though? 


The most unique aspects of a PCAOB audit stem from certain specific SEC and PCAOB independence requirements, specific audit committee communication requirements, and a few other auditor reporting considerations, such as critical audit matters. However, the majority of the audit standards are very similar. This shouldn’t be a surprise since the PCAOB initially took the AICPA auditing standards and adopted them as interim standards until the PCAOB could issue official guidance. While there is some wordsmithing here and there, the core principles remain largely unchanged. Perhaps the most significant difference in the two audit standards is the requirement of the PCAOB to perform a test of detail to address a significant risk and/or fraud risk, regardless of controls reliance, while the AICPA only requires a test of detail if there is no controls reliance. 


There really isn’t much of a distinction otherwise. So why do firms treat AICPA and PCAOB audits so differently? Well, in my opinion, it’s because the PCAOB performs inspections and holds firms strictly to the standard. There is no regulator for the AICPA; rather, enforcement of AICPA standards is accomplished through peer review. Is that really sufficient? Isn’t peer review and the lack of an enforcement agency what ultimately gave rise to the PCAOB in the first place? 


Essentially, firms are dividing audits between PCAOB and AICPA standards because the regulator of PCAOB auditing standards holds firms to a higher bar. Standards are largely the same and yet, we treat them as night and day. Is that really the right approach? When I challenge firms on auditing, generally most will acknowledge that audit is audit is audit, regardless of the standards. But when it comes to how we actually execute audits, firms inherently accept that there is a different standard. If we accept that there are minor differences between a PCAOB and AICPA audit, let’s see how that might change or impact aspects of a firm’s system of quality management. 


Training


Currently, most firms break up their staff into public company and private company auditors and provide different training and career paths for the two populations. Does that really make sense? Perhaps audit training should be the same for all staff. The principles, after all, are largely the same. For those who work on a PCAOB audit, perhaps those staff should also attend a supplemental training where the “bridge” from an AICPA to a PCAOB audit is explained. But that might only be an additional hour or two of training. There just aren’t that many differences otherwise, to merit two distinct training paths. 


In particular, I find this to be overwhelming present within the space of ICFR. Again, both PCAOB and AICPA have the same minimum requirements for understanding the design and implementation of controls and yet, most AICPA auditors never receive in-depth ICFR training. Historically, given most private company audits are non-integrated, perhaps that was okay. But with the ever-increasingly pervasive nature of technology within clients, all auditors need to have a strong understanding of internal controls. This helps to identify risks and plan an appropriate audit response. 


Increasingly, I am seeing engagement teams struggle with adopting “hybrid” approaches to testing data and information coming from systems, but ultimately asserting to a “non-controls reliance” approach. In other words, teams don’t think they’re relying on controls, but they are relying on system generated reports which are inherently relying on controls over a system in order to ensure reliability. When I have conversations with these teams, they are quickly lost. Some assert to the fact that they evaluated the design of ITGCs and believed that they could rely on the system without testing the operating effectiveness. Some assert to the testing completeness and accuracy of information by tying a report back to the system. Well, that’s fine, except you haven’t tested controls over inputs into the system and you have tested controls around the system. These hybrid approaches are popping up more and more and teams don’t have the rhetoric or knowledge to understand internal controls, in particular around systems and information. If teams understood these concepts (because they were invited to ICFR trainings), they might be able to better plan a more appropriate audit approach, taking into account the decision to test or not test controls. It starts first with understanding; knowledge is power. 


Methodology 


Methodology is another area firms distinguish between PCAOB and AICPA audits. Again, I fully acknowledge that there are differences between the two standards and so an audit binder should have supplemental workpapers for a PCAOB audit that “bridge” the gap, such as requirements around independence and audit committee communications, etc. But again, the main audit principles are the same. 


I think it’s appropriate to have two different “workpaper setups” for public and private company audits that ensure engagement teams will meet the minimum requirements. What I find is perhaps less acceptable is to have different methodologies when the standards are largely the same. 


Let’s consider sampling for a moment. I’ve worked with multiple firms that have different sampling methodologies for public and private company audits. In the public company space, the PCAOB often challenges the use of a judgmental sample if the remaining untested balance is material. As a result, firms have moved away from judgmental samples in PCAOB audits and instead pushed teams to either apply targeted sampling (i.e. targeting items until the untested balance is below materiality) or statistical sampling. However, I’ve heard comments that in the private company space, the firm still often uses judgmental samples, and these are considered acceptable. 


Let’s take a look at the sampling guidance for an AICPA audit. AU-C Section 530.06-.08 indicates: 


When designing an audit sample, the auditor should consider the purpose of the audit procedure and the characteristics of the population from which the sample will be drawn. (Ref: par. .A7–.A11) The auditor should determine a sample size sufficient to reduce sampling risk to an acceptably low level. (Ref: par. .A12–.A14) The auditor should select items for the sample in such a way that the auditor can reasonably expect the sample to be representative of the relevant population and likely to provide the auditor with a reasonable basis for conclusions about the population. (Ref: par. .A15–.A17) 


When taking a deeper look into the referenced guidance (i.e. A14), the AICPA guidance specifically states: 


The decision whether to use a statistical or nonstatistical sampling approach is a matter for the auditor's professional judgment; however, sample size is not a valid criterion to use in deciding between statistical and nonstatistical approaches…An auditor who applies nonstatistical sampling exercises professional judgment to relate the same factors used in statistical sampling in determining the appropriate sample size. Ordinarily, this would result in a sample size comparable with the sample size resulting from an efficient and effectively designed statistical sample, considering the same sampling parameters… 


The AICPA does allow for judgmental samples, but it also explicitly states that those samples should consider the same sampling parameters (i.e. tolerable misstatement, expected misstatement, risk of material misstatement, assurance from other substantive procedures, number of sampling units, and stratification, etc.) and should be comparable to a statistical sample. Do you know how many times I’ve seen teams apply “professional judgment” and test only five items or maybe ten items? And when I ask what a statistical sample would yield, the answer is “Way too many. We ran the model and it would have been in the hundreds.” The AICPA explicitly states that “…sample size is not a valid criterion to use in deciding between statistical and nonstatistical approaches.” My response is always, “So how does this judgmental sample take into account risk of material misstatement and materiality?” The answer, to which, is typically silence. No documentation and no response. 


This is just one example of how firms allow for different methodologies for public and private company audits, even though the principles are largely the same. 


Firm Monitoring


Finally, as part of PCAOB and AICPA quality management standards, firms are required to perform internal monitoring procedures. This typically translates into lookback reviews performed during the slower summer months over a sample of audits. 


In its Staff Update and Preview of 2020 Inspection Observations, the PCAOB indicates that it is 


We also observed situations where we identified deficiencies through our inspection procedures that were not identified through an audit firm’s internal inspection procedures directed to the same engagements. Such results may indicate that the audit firm’s QC system related to monitoring does not provide reasonable assurance that the audit firm’s internal inspection program is suitably designed and/or being effectively applied. 


What this tells me is that firms apply a different level of rigor internally than the PCAOB. It comes as no surprise that the PCAOB, being the regulator is by far the most exigent in terms of adhering to standards. Some might argue, it’s overly exigent, but that’s a debate for another time. The point of the matter is that firms are inherently missing the mark when inspecting their own work and are failing to identify quality concerns. 


If firms are failing to identify internal issues, what does that mean for the peer review process for AICPA audits? The auditing profession was self-regulated up until the Enron scandal and the collapse of Arthur Andersen which brought about the advent of the PCAOB and Sarbanes-Oxley. I’m not saying the PCAOB is always right or justified, but that the profession missed the mark once before and if the PCAOB is finding that firms’ internal inspections are not of a sufficient quality, then arguably, peer reviews are not being held to the same rigor. I believe this all stems from the fact that firms, and the industry as whole, views PCAOB and AICPA standards as inherently different and thus, applies an inherently different level of quality. Yes, there is less public exposure in the private company world, but does that mean audits should be performed at a different level of quality? 


When the auditing standards (or the core principles at least) are arguably the same, why do we have such a divergence in application of the standards when we execute on public company and private company audits? At the December AICPA SEC Conference, the SEC’s Division of Enforcement asked the question, “Where are the gatekeepers?” They indicated that there is an erosion of trust in the markets. The Division went on to share numerous examples of accounting concerns and made very clear they are challenging the gatekeepers, which includes the audit firms issuing the opinions. 


Let’s call a spade a spade. An audit is an audit is an audit, regardless of whether it’s a PCAOB audit or an AICPA audit. Yes, there are distinct differences, but the core of an audit is the same. It’s time we as a profession apply the same level of quality to public as well as to private company audits. 


About Johnson Global Advisory 

Johnson Global partners with leadership of public accounting firms, driving change to achieve the highest level of audit quality. Led by former PCAOB and SEC staff, JGA professionals are passionate and practical in their support to firms in their audit quality journey. We accelerate the opportunities to improve quality through policies, practices, and controls throughout the firm. This innovative approach harnesses technology to transform audit quality. Our team is designed to maintain a close pulse on regulatory environments around the world and incorporate solutions which navigate those standards. JGA is committed to helping the profession in amplifying quality worldwide. 


Visit www.johnson-global.com to learn more about Johnson Global. 

Monitoring and Remediation: Turning Engagement Deficiencies Into System Improvement

April 28, 2026
In our work with firms, we have seen a clear shift in how monitoring and remediation are viewed under modern quality management frameworks. They are no longer treated as retrospective compliance exercises. Instead, engagement deficiencies are increasingly used as meaningful inputs into an ongoing, risk-based system designed to identify issues early, address them thoughtfully, and reduce the likelihood of recurrence. Regulatory messaging reinforces this evolution. Oversight bodies are signaling a shift in focus from isolated engagement outcomes and more on whether firms have a system of quality management that consistently detects quality risks, responds appropriately, and demonstrates that remediation is working in practice. Based on our experience, while individual engagement deficiencies remain important, the more critical question is becoming how firms analyze, respond to, and learn from those issues over time. Engagement Deficiencies Are Signals, Not Endpoints Engagement deficiencies can surface through many channels, including pre-issuance reviews, internal inspections, post-issuance reviews, peer reviews, and regulatory inspections. Regardless of source, firms benefit most when these findings are evaluated through a consistent quality management lens. In practice, we encourage firms to look beyond whether a single engagement fell short . The more meaningful consideration is whether the deficiency points to potential weaknesses in governance, methodology, training, supervision, resourcing, or monitoring activities. We often observe that when issues are quickly labeled as engagement-specific, without assessing whether they reflect broader quality risks, valuable insight is lost. Modern quality management frameworks are designed to use these signals to strengthen the system, not simply close individual findings. What Effective Monitoring and Remediation Looks Like in Practice Firms that navigate this environment effectively tend to apply a disciplined and repeatable approach when deficiencies are identified. Based on our experience supporting firms across a range of practice areas, several elements consistently make a difference: Assess whether the issue may be systemic Recurring observations across engagements, service lines, or time periods often indicate system-level risk. Similar documentation gaps, inconsistent application of methodology, or supervision challenges rarely arise in isolation. Perform meaningful root cause analysis Effective root cause analysis typically moves beyond surface explanations. Firms benefit from evaluating whether policies and procedures were designed appropriately, implemented as intended, and supported by sufficient training, time, and resources. Design remediation that directly responds to the quality risk Remediation is most effective when it is clearly linked to the underlying risk. Depending on the circumstances, this may include enhancements to methodology, targeted training, revised review requirements, or changes to engagement acceptance, staffing, or oversight processes. Validate remediation through timely monitoring Implementing corrective actions is only part of the process. In our experience, firms are most successful when they also confirm that remediation operates as intended. Follow-up monitoring performed early enough to prevent recurrence is a critical component of this step. Failure to validate remediation remains one of the most common and consequential weaknesses we observe across firms. Case Study: When Remediation Is Not Validated In one situation we encountered, a firm identified engagement deficiencies through post-issuance reviews. The issues mirrored observations that had previously been noted during peer review and were communicated as having been addressed by the group responsible for report issuance. However, responsibility for validation was not clearly assigned, and no follow-up procedures were performed to evaluate whether the revised processes were effective. Subsequent post-issuance reviews, triggered by an organizational change, revealed that similar and additional deficiencies had re-emerged. From a quality management perspective, this was not an engagement execution failure. It reflected a breakdown in monitoring and remediation. The firm had information indicating quality risk but did not adjust its monitoring activities to confirm that remediation was working. Viewed through a system lens, this represents a system-level deficiency rather than an isolated engagement issue. Quality Management Applies Across All Engagement Types Modern quality management frameworks apply across a firm’s assurance and attestation practice, including private company audits, public company audits, SOC engagements, nonprofit audits, and other services. Deficiencies identified in any practice area may signal broader weaknesses in: Governance and leadership Methodology and training Monitoring activities Remediation processes In our experience, firms struggle to maintain an effective system of quality management when certain practices are treated as exempt from system-level evaluation. Key Takeaways Engagement deficiencies are inputs into the system, not endpoints. Recurring issues often indicate systemic quality risk. Remediation should be validated, not assumed. Monitoring activities should evolve as risks emerge. Quality management applies across all engagement types. Firms that treat monitoring and remediation as a continuous feedback loop, rather than a periodic exercise, are typically better positioned to improve engagement quality and respond to evolving regulatory expectations. Looking for an independent perspective on whether engagement deficiencies have been fully addressed? Based on our experience working with firms across assurance and attestation practices, Johnson Global Advisory supports clients by performing independent reviews, validating remediation efforts, and strengthening monitoring processes. If you would like support refining policies, training, workflows, or documentation standards, or would benefit from an objective assessment ahead of regulatory, peer, or internal inspections, contact your JGA audit quality advisor to discuss your needs.

What Regulators Expect to See When AI Is Used

April 28, 2026
Artificial intelligence (“AI”) is no longer experimental in public company audits. From risk assessment and scoping decisions to population testing, anomaly detection, and documentation support, AI enabled tools are increasingly embedded in audit execution and workflow. As use expands, the auditor’s core obligations do not shift to the technology, they remain with the engagement team. If AI is used to inform judgments, influence the nature, timing, or extent of procedures, or summarize and interpret information, auditors must still demonstrate that they obtained sufficient appropriate audit evidence and applied professional skepticism throughout. In practice, auditors must understand what the tool is doing, confirm that inputs are complete and accurate, and evaluate whether the outputs are reliable and fit for purpose in the specific audit context. While the auditing standard devoted solely to AI have not been issued, our experience is that inspectors have been increasingly direct—through staff publications, questions from inspectors in the field, and public remarks—about what they expect to see when AI is used. The expectations are grounded in existing standards and longstanding inspection focus areas: audit evidence, supervision and review, professional skepticism, and firm quality control (now quality management). In other words, AI does not create a “new” audit; it amplifies the need to show your work. Firms that treat AI as a “shortcut”, rely on outputs that cannot be explained or reproduced, or fail to govern and document how tools were selected, configured, and monitored are inviting new risks to support their audit conclusions. Conversely, firms that can clearly articulate the purpose of the tool, how it aligns to audit objectives, how inputs and outputs were validated, and how experienced personnel supervised and challenged the results will be far better positioned during inspection. The table below summarizes what inspectors typically expect to see documented when AI is used in a public company audit. Firms can use these themes to evaluate whether their engagement documentation tells a complete story that an experienced auditor (and an inspector) can follow from objective, to procedure, to results, to conclusion. 

Audit Documentation: From Low-Hanging Fruit to Load-Bearing Standard

March 30, 2026
In a previous article, Back to Basics: Audit Documentation Failures Have Become Dangerous Low Hanging Fruit , we highlighted how audit documentation had quietly re-emerged as a source of regulatory risk after years of relative deprioritization. While PCAOB Auditing Standard 1215, Audit Documentation (AS 1215), has historically been cited less frequently than other standards, our direct experience from recent inspection activity, enforcement actions, and internal inspection results, demonstrate that documentation failures are increasingly treated as indicators of deeper execution, supervision, and quality management breakdowns. In today’s environment, audit documentation is no longer merely a record of work performed. It is the primary evidence inspectors rely on to evaluate whether an engagement was properly planned, executed, and supported at the time the auditor’s report was issued. What has been low-hanging fruit now requires firms to close these gaps and transform them into a load-bearing foundation for audit quality. From Rare Enforcement to Systemic Inspection Risk AS 1215 establishes clear requirements regarding what must be documented, when documentation must be completed, and how engagement files must be assembled and retained. As discussed in our prior article, failures to comply with these requirements were historically viewed as technical or secondary issues, often resulting in inspection comments rather than enforcement action. That distinction is no longer meaningful. Recent enforcement actions involving backdating, improper (both intentionally, and inadvertent) modification of workpapers, and failure to timely assemble a complete audit file reflect an evolving regulatory view. Documentation failures do not simply violate procedural requirements; they call into question the credibility of the audit opinion itself. More importantly, beyond enforcement, documentation deficiencies are increasingly cited as core inspection findings. Inspectors are challenging situations where engagement teams assert that work was performed but cannot demonstrate that work within the archived file. In these cases, the absence of timely, complete, and clear documentation is no longer treated as a formality. It is treated as evidence that the engagement may not have been properly executed, supervised, or supported in accordance with PCAOB standards. This represents a fundamental shift. Documentation is no longer “low-hanging fruit.” It is a systemic inspection risk that cuts across execution, supervision, and firm-level quality management. From Misconduct to Execution Failures Pervasive documentation failures that do not involve intentional misconduct but still result in non-compliance are increasingly observed. For example, reviewer signoffs occurring near the documentation completion date, rather than contemporaneously with the performance of audit procedures, raise questions about whether effective supervision occurred during the audit or was deferred to meeting archiving deadlines. Similarly, engagement teams may assert that key judgments can be explained verbally, even when those judgments are not clearly documented in the audit file. In today’s environment, the distinction between “we can explain it” and “it is clearly documented” is critical. If procedures, judgments, and conclusions are not evident in the documentation itself, inspectors increasingly conclude that the work was not performed in accordance with PCAOB standards. The issue is not whether the engagement team can explain what they did after the fact. The issue is whether the archived documentation allows an experienced auditor, with no prior connection to the engagement, to understand the procedures performed, evidence obtained, and conclusions reached at the time of the auditor’s report. When documentation fails to reach that standard, inspectors are increasingly concluding that the audit itself was not properly executed, regardless of intent. This reflects an important shift. Documentation failures are no longer viewed primarily as misconduct. They are viewed as symptoms of execution breakdowns, including delayed supervision, compressed review cycles, and audit workflows that defer documentation until the end of the engagement. As a result, AS 1215 has become a direct proxy for how audits are actually performed in practice. How the 14-Day Documentation Completion Requirement Changes the Risk Profile The execution risks are further amplified by the PCAOB’s shortened documentation completion timeline. Recent amendments to AS 1215 reduce the timeframe to assemble a complete and final audit file from 45 days to 14 days after the report release date. While this change may appear procedural, its implications are operational. Under this accelerated timeline, engagement teams no longer have a meaningful post-issuance window to resolve review notes, complete documentation, or finalize supervisory evidence. What were once viewed as “clean-up” activities are now more likely to result in timing violations and non-compliance. This shift places increased emphasis on: Contemporaneous documentation Real-time supervision Realistic workload and staffing models Audit Documentation as a Cornerstone of Audit Quality Audit documentation has long been described as low-hanging fruit in the inspection process. That characterization no longer reflects its role in today’s regulatory environment. Documentation now serves as the primary lens through which regulators assess whether an engagement was properly executed, supervised, and supported. With shortened timelines, expanded quality management expectations, and increased regulatory scrutiny, firms can no longer treat documentation as a downstream activity. It must be embedded into how engagements are planned, staffed, reviewed, and completed. In an environment where inspection conclusions are driven by what is, and what is not, in the audit file, strong documentation is not merely defensive. It is foundational to audit quality. At Johnson Global Advisory , we support firms in selecting, implementing, and optimizing these tools to meet their unique needs. For more insights, visit our blog or contact us to learn how we can help your firm AmplifyQuality®. For more information, please contact your JGA audit quality expert .

Accounting Firm Acquisitions: Why Due Diligence and Integration Determine Long-Term Success

March 30, 2026
Mergers and acquisitions within the accounting firm industry continue to accelerate, driven by succession planning needs, technology investment, talent constraints, geographic expansion, and the pursuit of new service lines. The pace and volume of transactions is being fueled, in large part, by private equity investment in the accounting firm space. Yet as deal activity accelerates, so does a critical reality: the long term success of an acquisition is determined well before the transaction closes—and long after the announcement is made. Experience across the profession shows that insufficient due diligence and poorly executed post acquisition integration are the most common sources of value erosion in accounting firm transactions. What the Regulator is saying and How JGA sees it At the AICPA December 2025 conference on Current SEC and PCAOB Developments, common topics were the presence of private equity in the accounting firm space and the opportunities and challenges that come with this investment. As it relates to private equity, then-acting PCAOB Chair George Botic noted that while these investments have the potential to enhance audit quality by increasing firm capacity and modernizing audit tools with advanced technologies, the presence of private equity presents a risk that firms shift incentives to prioritize profitability over audit quality. Mr. Botic stated, “Both AI and private equity investments in accounting firms carry the potential to truly reshape the profession. Yet these opportunities come with clear challenges to ensure that overreliance on AI and the pressures of private equity do not jeopardize audit quality.” At JGA, we expect the PCAOB to increase its inspection focus on a firm’s system of quality management. To the extent that acquisitions present quality risks to a firm, we expect increased attention from the PCAOB in terms of how firms are managing these risks. Due Diligence: Looking Beyond the Numbers Financial performance, partner buy ins, and deal structure naturally receive significant attention during an acquisition. However, professional services firms—particularly those providing audit and assurance services—certain of the greatest risks often reside outside the financial statements. Effective accounting firm due diligence must assess not only what the target firm has earned, but how it has earned it—and whether that performance is sustainable. This includes gaining a deep understanding of: Audit quality history, including inspection and peer review results, Independence, ethics, and regulatory compliance practices, Industries served, industry concentration and related expertise, Client concentration, retention trends, and engagement risk profiles, Partner governance, compensation alignment, and succession readiness, Technology platforms, data security, and scalability, and Firm culture, leadership dynamics, and decision making processes. When these areas are not rigorously evaluated, issues frequently surface after the transaction closing—when remediation is more disruptive, more expensive, and far more visible to regulators, clients, and staff. The Risks of Inadequate Due Diligence Inadequate diligence often leads to unanticipated post transaction challenges, including: Regulatory findings related to legacy engagements, Independence violations requiring retroactive remediation, Client attrition driven by service disruption or cultural misalignment, Talent loss stemming from unclear expectations or compensation inequities, and Technology incompatibilities that impair efficiency and data integrity. Deficiencies inherited through acquisition can affect inspection outcomes, firm reputation, and overall audit quality long after the transaction closes. Integration: Where Value Is Created—or Lost Even when due diligence is performed thoughtfully, post acquisition integration remains the most common point of failure. Integration is often underestimated, treated as an operational exercise rather than a strategic initiative requiring sustained leadership attention. Successful integration goes far beyond combining systems or standardizing branding. It requires deliberate alignment across how the firm operates, governs itself, and delivers quality—particularly in areas such as: Audit methodology and documentation standards Quality management systems and monitoring processes Partner roles, authority, and accountability Talent development, evaluation, and retention Communication with clients, regulators, and staff Absent a structured integration plan, firms risk operating as a collection of semi independent practices rather than a cohesive organization. This fragmentation can undermine consistency, weaken accountability, and complicate regulatory compliance. A Strategic Imperative in a Changing Profession As consolidation continues and regulatory scrutiny intensifies, rigorous due diligence and disciplined integration are no longer optional. They are essential to managing risk, sustaining quality, and realizing the full value of a transaction. For accounting firm leaders, the message is clear: growth through acquisition can be a powerful strategy—but only when supported by a comprehensive understanding of what is being acquired and a deliberate plan for how the combined firm will operate as one. Firms that treat diligence and integration as leadership imperatives—rather than transactional steps—are better positioned to protect audit quality, retain talent, and preserve client trust while achieving growth objectives. JGA’s Role Guiding Firms through these Opportunities For firms seeking to grow through acquisition without sacrificing quality, control, or visibility, JGA is a solution. JGA is uniquely qualified with deep experience working with accounting firms on quality management, governance, and operational transformation. We have proven due-diligence tools built that are designed to be practical, adaptable, and immediately usable—while also supporting long term consistency as firms pursue multiple acquisitions over time. Ready to get started or need help refining your acquisition activities? Contact your JGA audit quality expert today to schedule a consultation and ensure acquisition activities are tailored to your firm’s needs.

JGA to Sponsor ALI's Accountants' Liability 2026 Conference

By Jackson Johnson • February 24, 2026
WASHINGTON, D.C.: — Johnson Global Advisory (JGA) is proud to sponsor the ALI’s Accountants’ Liability 2026 conference hosted by the American Law Institute (ALI). The two‑day program will take place May 14–15, 2026, in Washington, D.C., with a live webcast option available for remote attendees. This annual conference is a premier forum for accounting firm leaders, in‑house counsel, litigators, and regulators to examine the evolving landscape of accountants’ liability, enforcement priorities, and risk management. The 2026 program will explore how recent regulatory, litigation, and technological developments are reshaping the profession and what firms can do to proactively respond. “We are pleased to once again sponsor the ALI Accountants’ Liability Conference,” said Jackson Johnson, President of Johnson Global Advisory. “This event consistently brings together leading regulators, practitioners, and risk professionals to discuss the most pressing liability and oversight issues facing accounting firms today. We value the opportunity to engage with participants and contribute to these important conversations.” The program will feature nationally recognized panels of practitioners, general counsel, industry professionals, and government officials. Planned discussions will address current and emerging challenges facing accounting firms, including: Regulatory and enforcement priorities impacting the accounting profession Recent trends in accounting‑related litigation PCAOB and SEC perspectives on audits, inspections, and gatekeeper liability The impact of AI, cryptocurrency, and emerging technologies on audit quality and firm risk Best practices for navigating an evolving and uncertain regulatory environment Register by April 13, 2026, to attend in-person and use the code “ JGA2026 ” to save $250 off . OR, for webcast attendance, use the code " JOHNSON " to save $125 off the tuition. Click here to register. To learn more about how Johnson Global partners with in-house and outside counsel to support public accounting firms, we invite you to explore our latest brochure. This resource outlines our approach to independent monitoring and consulting, including how we assist firms in navigating PCAOB and SEC investigations, implementing quality control improvements, and responding to regulatory findings. Download the brochure below to see how our experienced team can help your firm meet today’s compliance challenges and build a stronger foundation for the future. Get a copy of our brochure here . About Johnson Global Advisory Johnson Global partners with leadership of public accounting firms, driving change to achieve the highest level of audit quality. Led by former PCAOB and SEC staff, JGA professionals are passionate and practical in their support to firms in their audit quality journey. We accelerate the opportunities to improve quality through policies, practices, and controls throughout the firm. This innovative approach harnesses technology to transform audit quality. Our team is designed to maintain a close pulse on regulatory environments around the world and incorporates solutions which navigates those standards. JGA is committed to helping the profession in amplifying quality worldwide. Visit www.johnson-global.com to learn more about Johnson Global.

Joe Lynch, JGA Shareholder, to Present in AICPA & CIMA Quality Management Webcast Series

By Jackson Johnson • February 24, 2026
We’re pleased to share that Joe Lynch , JGA Shareholder, will be presenting in a series of AICPA & CIMA webcasts focused on practical considerations for Quality Management. These sessions are designed to provide guidance in your QM journey. They support key elements such as engagement quality reviews, root cause analysis, and ongoing monitoring and remediation. Register for Upcoming Sessions Session 1 — Quality Management: Engagement Quality Reviews What you’ll learn: Practical considerations for your firm's responsibilities for engagement quality reviews and the reviewers requirements when executing engagement quality reviews under the updated quality management standards, including how to make EQRs scalable and effective. Register for this session here . Session 2 — Quality Management: Performing a Root Cause Analysis What you’ll learn: How root cause analysis supports remediation by identifying underlying drivers of the findings and deficiencies; supporting the design of corrective actions that prevent recurrence. Register for this session here . Session 3 — Quality Management: My System is Set Up — Now What? What you’ll learn: Post-implementation requirements of SQMS No. 1, which include monitoring activities, evaluating findings and deficiencies, remediation, and the annual evaluation process—so your system stays responsive and effective. Register for this session here . These sessions are included with a current Webcast Pass. At Johnson Global Advisory , we support firms in selecting, implementing, and optimizing these tools to meet their unique needs. For more insights, visit our blog or contact us to learn how we can help your firm AmplifyQuality®.

Joe Lynch, JGA Shareholder, to Provide Insights on Changes to Engagement Quality Review Requirements

By Jackson Johnson • January 20, 2026
JGA is pleased to announce that Joe Lynch , JGA Shareholder, will be a featured guest on the upcoming AICPA & CIMA A&A Focus live webcast on February 4, 2026. Joe has been invited to join the program to provide insights on changes to engagement quality review requirements. This appearance offers a valuable opportunity for viewers to gain practical, real-time guidance on effective EQR practices—an increasingly critical component of audit quality and compliance under the evolving professional standards landscape. Click here for m ore information about the program and registration details. At Johnson Global Advisory, we support firms in selecting, implementing, and optimizing these tools to meet their unique needs. For more insights, visit our blog or contact us to learn how we can help your firm AmplifyQuality®. For more information, please contact your JGA audit quality expert .

Quality Management in 2026: Considerations to Successfully Adapt to a Transforming Environment

January 20, 2026
Introduction The accounting firm industry experienced a ground-breaking transaction in August of 2021 when TowerBrook acquired EisnerAmper, which marked the first private equity (“PE”) transaction of a large-scale accounting firm. This transaction was structured using an alternative practice structure (“APS”). Historically, licensing and independence rules have barred non-CPAs from owning accounting firms. Through an APS, a PE firm may invest in the non-attest entity with service lines such as tax advisory and consulting. The CPA partners retain control over the attest functions, which preserves regulatory compliance. While the APS model has been in existence since the 1990s, this August 2021 transaction brought new attention to this structure. What has followed is an extraordinary volume of deal activity. Per the CPA Trendlines (“CPAT”) Cornerstone report posted on November 18, 2025, CPAT has tracked over 115 PE-related transactions from 2020 to 2025, with over 80 transactions in 2025. While PE in the accounting firm space is no longer news, the pace and volume of transactions is certainly news-worthy. Impact of PE Investment The impact of PE investment on the accounting firm space is unprecedented. The APS has enabled PE to fuel billions of capital investment. PE-backed firms provide immediate payouts to partners at appealing valuations while providing access to capital to these firms for merger and acquisition growth, technology investments, and other priorities. Well-capitalized firms now have an improved ability to invest in technological capabilities, attract experienced talent to be more competitive for college graduates, and improve their market position. With new technologies, routine tasks are being automated such as data entry, tie-outs and controls testing, resulting in less time needed to perform certain audit procedures. What the regulators are saying At the AICPA December 2025 conference on Current SEC and PCAOB Developments, common topics were the presence of private equity in the accounting firm space and the opportunities and challenges that come with this investment. PCAOB Acting PCAOB Chair George Botic described that both transformative technologies (e.g., artificial intelligence or “AI”) and the continuing expansion of private equity investments in accounting firms are two developments that bring opportunities and challenges. Mr. Botic noted that while AI has enhanced risk assessment, reduced manual processes and made it possible to efficiently analyze entire populations of data (which can reduce the risk of missing irregularities or unusual patterns), that overreliance on AI may ultimately threaten auditors’ exercise of professional skepticism and judgment. As it relates to private equity, Mr. Botic noted that while these investments have the potential to enhance audit quality by increasing firm capacity and modernizing audit tools with advanced technologies, the presence of private equity presents a risk that firms shift incentives to prioritize profitability over audit quality. Mr. Botic stated, “Both AI and private equity investments in accounting firms carry the potential to truly reshape the profession. Yet these opportunities come with clear challenges to ensure that overreliance on AI and the pressures of private equity do not jeopardize audit quality.” SEC SEC Chair Atkins discussed in his remarks that he would like the PCAOB to modify its inspections process to place more reliance on the system of quality management and that inspection of certain engagements would inform the PCAOB if the firm’s system of quality management is effective. He also expressed a view that accountability for audit quality should move upward to firm leadership. How is a firm’s system of quality management (“SQM”) impacted? Today’s transforming environment has far-reaching impacts on a firm’s SQM. This publication will focus on risk assessment, governance and leadership, ethics and independence, resources, engagement performance, and monitoring and remediation. 

Year in Review: Here are the Top 10 Actionable Insights of 2025

By Jackson Johnson • December 30, 2025
As we wrap up an incredible year, we’re showcasing the insights that sparked the most conversations and drove the most impact. Here are the Top 10 Actionable Insights from 2025: Use of Other Auditors: Managing Risk and the New PCAOB Standard ISQM 1, SQMS 1: Influencing the Firm on the Benefits Beyond Compliance (Part II) Case Study – Example Successor Auditor Considerations QC 1000 Implementation: Key Themes and Guidance from the PCAOB Workshop Clearing the Roadblocks: Auditing Estimates with Confidence in Small Firms Enhancing Auditor Independence: Key Themes from PCAOB Recent Spotlight The Never-Ending Story: How to Remediate Recurring EQR Findings – Part Deux Cryptic Audits of Crypto Assets: Auditing Digital Assets Innovative Solutions for QC 1000, SQMS 1, & ISQM 1: Quality Management tools in the Marketplace Enhancing Audit Evidence: PCAOB Expectations and What We Are Seeing in Practice

Enhancing Audit Evidence: PCAOB Expectations and What We Are Seeing in Practice

November 24, 2025
As companies increasingly rely on cloud platforms, external data providers, and integrated third-party systems, the boundary between “internal” and “external” information has blurred. Audit evidence today may originate outside the company, but often arrives through the company, transformed, mapped, merged, or embedded within systems before it reaches the auditor. In response to this evolving landscape, the PCAOB amended AS 1105, Audit Evidence, effective for audits of fiscal years beginning on or after December 15, 2025. Central to these amendments is AS 1105.10A, which introduces a principle-based, risk-scalable framework for evaluating the reliability of electronic information provided by the company. At JGA, we view this development as a natural response to the data ecosystems shaping today’s financial reporting. We also see it rapidly becoming a recurring area of focus by global audit regulators, particularly when the information supports significant risks, revenue, fraud procedures, or management estimates. This article summarizes key themes from the PCAOB’s Board Policy Statement on Evaluating External Electronic Information (issued September 2025) paired with practical observations from JGA’s inspection support and methodology enhancement work with firms across the profession. Why External Electronic Information is a Growing Focus Area Across industries, external platforms now drive core financial and operational processes: payment processors, logistics platforms, third-party fulfillment solutions, subscription systems, industry data services, and more. Although such information originates from outside the company, it is often: Received, stored, or routed through company systems Transformed within spreadsheets or EUCs Merged with internally generated data Exported in formats that allow modification Provided to auditors without a traceable chain to the original source. Our direct experience working with our clients shows that PCAOB inspection teams consistently emphasize that external does not inherently mean reliable. The auditor must understand how the information was obtained, how it was handled, and whether there was a reasonable possibility that it could have been modified before reaching the auditor. Understanding AS 1105.10A The Board Policy Statement highlights two foundational expectations: 1. Auditors should understand the source and flow of the information. Inspection teams frequently question whether the engagement team understood: The true originating source of the data How the company received it (e.g., automated feed vs. manual upload) Whether the information is editable or configurable Whether it passed through multiple systems or spreadsheets How it is used in controls, substantive testing, or significant estimates In JGA’s experience, inspection findings often arise from situations where teams relied on a “system-generated” or “externally sourced” report without fully understanding where it came from or whether it could have been changed. 2. Auditors should address the risk of modification. The standard allows for two broad approaches, testing the information itself or relying on controls, depending on the assessed risk. The standard is intentionally flexible, but this flexibility requires well-supported judgments, especially for information affecting significant accounts or fraud risks. The PCAOB also acknowledged scenarios where separate testing may not be required (e.g., direct-to-auditor feeds or read-only API transfers) but emphasized that this exception applies only when the risk of modification is no more than remote. What We Observe in PCAOB Inspections Through JGA’s transformation activities with firms, we continue to see consistent challenges in the following areas: Reliance on information provided by the company without evaluating whether transformed, filtered, or merged with other data sets. Use of external or industry data in analytics without understanding the methods, assumptions, or relevance to the issuer. External information embedded in significant estimates or complex models without evaluating management’s process for compiling that information. System-generated or external journal entry listings used in fraud procedures without establishing completeness and reliability. In each of these situations, inspection teams focus on whether engagement teams understood how the information was obtained, how it was processed, and whether there was a reasonable possibility of modification before it reached the auditor. Emerging PCAOB Expectations Although the standard is principles-based, several expectations are now appearing consistently in inspections: Reliability cannot be presumed, external information must be evaluated just like any other audit evidence. Understanding the company’s process for receiving and handling external information is foundational. Judgments about whether separate testing is required must be risk-responsive and well-supported. Documentation should clearly articulate the source of the information, the company’s process, and the basis for concluding the information was reliable. These expectations are shaping how firms need to think about IPE testing, data flows, and the role of technology within the audit. Areas Where Firms Often Seek Assistance Across our methodology enhancement and inspection support work, firms consistently ask for help in: Identifying when information is “external electronic information provided by the company”. Determining whether reliance on management’s process is appropriate. Navigating situations where data passes through multiple systems or spreadsheets. Evaluating third-party or industry data used in analytics. Assessing effects on significant risks, especially revenue and fraud. Aligning documentation practices with PCAOB expectations. Many firms have strong processes for testing IPE, but other nuances of the standards require an additional layer of consideration that is still evolving in practice. Looking Ahead As companies build increasingly automated and interconnected systems, auditors must deepen their understanding of those environments to obtain sufficient appropriate evidence. Firms that proactively adapt their methodologies and train engagement teams will be better positioned for both compliance and audit quality. At JGA , we help firms interpret emerging regulatory requirements, strengthen methodologies, and enhance the use of technology and data in the audit. Ultimately, ensure compliance and consistency get to our ultimate goal of helping firms grow and scale responsibly. To learn how we can help your firm navigate these expectations and #AmplifyQuality, visit www.johnson-global.com, or contact a member of your JGA client service team.