Help Wanted: Audit Quality Considerations in Light of the Great Resignation

As a millennial, I was told that the 2008 global financial crisis was a “once-in-a-lifetime” economy. Many firms went on hiring freezes and some even had layoffs, rescinding offers previously extended to new college graduates. As a young 20-something-year-old, I was happy to know that the “exceptional” economy was early in my career and that the rest of my life would be smooth sailing. Or so I thought.

Then the pandemic of 2020 came around and yet again, the headlines proclaimed the unusual nature of the pandemic and the “once-in-a-lifetime” economic repercussions. Overnight it seemed, more than 10 million people lost their jobs and the world appeared to spiral out of control. Fast forward to August of 2022 and the economy has now fully recaptured the 10 million lost jobs. But surprisingly, there is suddenly a labor shortage. The Great Resignation. What? How is that possible?

Almost every industry is feeling it, whether the medical profession struggling with burnout from two-years of pandemic stress or the transportation industry struggling to find drivers to keep up with home deliveries. The audit industry is no exception; every client we work with is feeling it. We’re feeling it.

In a recent study published by McKinsey & Company, at the end of May 2022, there were 11.3 million job openings. And to make matters worse, “Despite significant changes in the economy since the onset of the Great Attrition (or what many call the Great Resignation), the share of workers planning to leave their jobs remains unchanged from 2021, at 40 percent. That’s two out of five employees in our global sample who said that they are thinking about leaving in the next three to six months.”

Talk with an economist and there are any number of reasons why there is a labor shortage in the current economy. But answers to “why” rarely provide practical solutions to “what do we do?”

For firms that are struggling with resources, we hear you. Within the audit and accounting profession, we know of many firms that have resorted to using part-time employees and independent contractors to help fill needs. Some firms have leveraged staff from various departments such as IT consulting or internal audit. While all these approaches fill the seats and provide resources to execute the audits, the question remains, what procedures are firms putting into place to ensure quality audits?

Firm QC Considerations

Acceptance and Continuance: Paramount to any audit, the firm process starts first and foremost with engagement acceptance and continuance. This process is already in place for firms, but how much thought is put into the careful completion of these checklists? The critical consideration here is capacity and competence. I know when I was an associate, I was charged with rolling forward the A&C forms from prior year; the senior then officially completed the form and the approval process started with the manager, then partner and up the chain depending on the type of client and the risk profile. In light of the current resource constraints, how are A&C forms capturing considerations around capacity and competence? And how do staff know whether the firm has the right resource capacity and competence? These are often higher-level discussions held at regional and national management levels, but how are those considerations being evaluated and documented? The reality is, if the firm doesn’t have the capacity or the right competence, it needs to either decline engagements or hire the right knowledge base/skill sets to execute a quality audit.

Independence: Once an engagement has been accepted, the firm then needs to determine the proper staffing. While it may be easy to pull from internal resources, such as leveraging IT consultants to come perform IT controls testing, the Firm needs to be intentional in making sure all engagement team members understand the independence implications of working on the audit. For instance, consulting has very few independence limitations, so an IT consultant may not be aware of the strict nature of SEC independence rules for a public company audit. Similarly, the use of contractors external to the firm is another viable solution to resource constraints, but the question still stands, despite completing an independence checklist/confirmation, has the consultant been educated on the specific nature of independence requirements for the audit?

Technical Knowledge: Assuming the borrowed staff and/or consultants are independent, what is the firm’s process for evaluating competence of these resources? Sure, firms know to review the CV and certifications, but we all know there is a distinction between an accountant and an auditor and yet both often have the same degree and may even both be CPAs. Or take an IT consultant for example. The IT consultant likely has a strong understanding of information systems and could easily perform a walkthrough and execute tests of operating effectiveness over automated controls and/or information technology general controls (ITGCs). However, mere execution is not the same as truly understanding the audit risks and implications of findings. For instance, in performing a walkthrough, the IT consultant may obtain an understanding of the change management process and as with all processes, there are always exceptions to the rules. The question is, would an IT consultant understand the audit implications for various exceptions? Or if the IT consultant is testing an automated control, would they know to test more than the mere functionality as described in the walkthrough? Would they know to test all possible scenarios to demonstrate that the system can only process information as described in the automated control?

Regardless the area, whether IT, valuation, tax or some other specialty knowledge, understanding audit risks is critical. After all, risk is what drives an audit. So, what does management do to ensure that resources have the proper audit understanding? While a three-hour training on PCAOB audit standards may help provide some insight and may placate the PCAOB from a “checklist” mentality, let’s be frank, audit risk is learned over time. There is a reason managers and partners perform reviews, having years of audit experience, slowly learning the risks and implications of various scenarios that emerge in audits. A three-hour training cannot replace years of experiential learning. The question remains, what are firms doing to bridge this gap? This points to consideration of the staffing mix and the need for appropriate review and supervision, as discussed below.

Monitoring: Current QC standards require various monitoring programs at a firm level. These programs are often executed for all internal resources, but what about external resources or resources from different divisions? Take independence monitoring and/or training/CPE/licensure monitoring, are “fill-in” resources subject to these same processes? While performing an independence check for an occasional contractor may be easy enough, as firms embrace more part-time workers and engage more contractors, firm QC processes will need to be amended to ensure appropriate checks over this emerging resource pool.

Tone at the Top: It’s worth emphasizing the importance of creating a culture of curiosity over conviction. Employees and teams should feel encouraged to ask questions, to seek for better understanding, and to not hesitate to consult with national office / upper management. Considering a lot of cumulative audit knowledge and experience is being lost through the great resignation, promoting a culture of knowledge sharing is even more important to ensuring employees feel comfortable raising their hand when they don’t understand something and feel supported by all levels of management so they can perform quality audits.

Engagement Team Considerations

Team Assignments: At the engagement team level, it’s important that firms consider the staffing mix on audit teams. While firms may have no choice but to use contractors and borrow staff from other departments, audit teams should still have “core audit members” who can share the audit knowledge and keep audit risks front of mind. Maybe that means the firm will need to rotate clients for some of its core assurance staff so that every team has core assurance members. As well, as audit areas are assigned, managers and partners should be thinking through risks at the financial statement level and ensuring higher risk audit areas are completed by stronger, core assurance members.

What about areas like IT or taxes where the area is specialized and may present a pervasive or significant risk? Firms need to be conscientious of these areas and if their resources do not themselves have the requisite audit knowledge and/or experience, then perhaps firms should consider specific coaching programs or targeted in-flight review programs that can compliment the use of contractors and/or borrowed staff. For instance, perhaps the firm uses an IT partner with years of in-depth audit experience to coach less experienced IT contractors across multiple engagements. As the workforce and employment model is changing, so too will the structure and makeup of engagement teams. Be creative.

Review and Supervision: In addition to the staffing mix, firms should consider review and supervision at the engagement team level. Though the standard around engagement team review and supervision has not changed, the expectations may be evolving. For areas performed by less experienced staff, whether new hires, borrowed staff, or independent contractors, managers and partners should be performing more in-depth reviews. For areas of higher risk, teams should consider whether additional levels of review are necessary. And for areas of specialized risk, as mentioned above, firms should consider whether there is a need for targeted in-flight reviews. Perhaps the most important factor for quality review and supervision is workload. What metrics is the firm using to monitor manager and partner workload? What are firms doing to relieve overworked managers and partners? This ties directly into the capacity discussions that management is having at the acceptance and continuance level.

Consultations: Finally, in conjunction with firm management setting the correct tone-at-the-top at the firm level, engagement teams should leverage firm-wide resources and not be afraid to consult when needed. Too often, teams only focus on required consultations, but nothing says that a team can’t consult when questions arise in other non-mandatory scenarios. Knowledge is power and firms have vast sums of cumulative audit knowledge and experience at the management levels, so don’t be afraid to reach out to national office with questions. Chances are, you aren’t the first to have that question.

Use of Other Firms Considerations

So far, we’ve focused mainly on the use of independent contractors and borrowed staff, but there is also a movement to using other audit firms to also assist with audits. Sometimes the other firm will issue an opinion and sometimes the other firm only performs audit procedures on behalf of the principal auditor. Currently, China comes to mind; given various restrictions due to COVID and regulatory concerns, many US firms are leveraging other audit firms in China to assist in executing audits. In our recent article of use of other auditors, we provide factors to consider, but the general theme points to review and supervision. So what procedures are firms implementing to ensure appropriate review over the work performed by other auditors? A mere review of the reporting package is likely not sufficient given the new PCAOB standards/amendments.

Technology Considerations

Given the digital age, we would be remiss not to mention technology. In our joint webinar on ISQM 1, Dayshape CEO, Andrew Bone, said: “For those already struggling to fill their current vacancies, the obvious question is where will this extra capacity come from? Unable to simply recruit and reluctant to scale back fee earning work, firms are looking to technological resources for answers. What firms are finding is that technology can help in a number of different ways.”

For instance, using technology for resource management will help firms easily identify available employees, what skills and experience various resources have, and potentially even reduce administrative burdens on resources, such as finding ways to automate administrative processes. “Technology can be used by firms to track and evidence that the right skills and competencies have been assigned to a project and that independence criteria have been met. When doing this at scale, technology can be extremely useful to help firms track skills firm-wide and demonstrate a robust and standardized process.”

In addition, technology can automate various Firm QC processes or monitor QC metrics (i.e. partner or manager workloads, as mentioned above). Bone continued, “technology can be used to implement automated project controls to provide assurance that the right quality measures and checks are in place and that these are followed consistently. These can be set at a firm level to ensure that the right people review and approve work at the right stage. Or at the engagement level where engagements failing certain quality criteria can also be automatically escalated.”

Finally, as we all know, big data can be incredibly powerful, and technology combined with data analytics could transform future audits. Already, technology is being used to help perform many non-subjective functions such as account reconciliations, cash proofs for revenue, various roll forwards for investments or equity or journal entries, etc. Technology requires an investment, but as we approach a more and more automated world, it will soon be inevitable, and thanks to software-as-a-service models, technology resources are becoming more and more accessible to the masses.

Key Takeaways

The Great Resignation is proving to be a challenging time for everyone. Whether flight cancellations or poor service in restaurants (if the restaurant stayed open), we’re all feeling the effects of staff shortages. For those who didn’t resign, it seems there is more to do with less (yet again). While use of contractors and borrowed staff is a temporary fix, firms should incorporate the following:

Acceptance and continuance decisions need to be thoughtfully considered, taking into account a firm’s capacity and competence.

Independence and ethics requirements should be clearly explained and understood by all staff working on audit engagements, regardless of whether they are internal or external.

Competence is more than just technical ability and should incorporate an element of understanding audit risk. This could be accomplished through trainings, but firms could also incorporate other elements such as engagement team coaching (either by team mangers and partners or through designated coaches), in-flight reviews, and consultations.

Engagement team staffing should be thoughtfully evaluated to ensure there is a mix of core assurance and other staff such as contractors or borrowed staff.

Review and supervision are becoming increasingly important, especially as the use of alternative resources increases. Ensure workloads allow for adequate time for coaching and review during an audit.

When using other audit firms, keep in mind the new PCAOB amendments and standards, largely pointing to increased responsibility around review and supervision for lead engagement teams.

There are tools, technology and services available to help. Firms must assess the gaps whether intellectual, human, or technological, and make investments now for the future.

No one knows how long the labor shortage will last. In the long term, the economy and the markets will adjust. My grandfather worked at one company his entire life. At the time, that was normal. Today, that’s exceptional. In the 90’s, companies complained about lack of loyalty when the younger generations began to change jobs more frequently, but sure enough, the workforce adjusted. Now with the Great Resignation, once again, companies are feeling the strain and in particular, the employees who didn’t resign. But, as has always been the case, the markets will adjust in time. Perhaps this is truly the emergence of the “gig economy” en masse. Perhaps this is creating the impetus needed for firms to more rapidly adopt technology, making audits more efficient. Whatever the outcome, in the short term, we can’t lose sight of audit quality. Filling seats isn’t the same as engaging the right resources with the appropriate firm QC protocols in place to enable teams made up of contractors, borrowed staff, and traditional assurance staff to perform high quality audits.

Dane Dowell is a Director at Johnson Global Accountancy who works with PCAOB-registered accounting firms to help them identify, develop, and implement opportunities to improve audit quality. With over 12 years of public accounting experience, he spent nearly half of his career at the PCAOB where he conducted inspections of audits and quality control. Dowell has extensive experience in audits of ICFR and has worked closely with attorneys in the PCAOB’s Division of Enforcement and Investigations. Prior to the PCAOB, he worked with asset management clients at PwC in Denver, Singapore, and Washington, DC.

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JGA Makes First Contribution to The Daughters of The American Revolution

May 28, 2025

WASHINGTON, D.C.: Johnson Global is proud to announce our first charitable contribution in support of the daughters of the American Revolution (DAR) —a historic nonprofit organization founded in 1890 and dedicated to historic preservation, education, and patriotism. With over 130 years of tradition and more than one million members since its founding, the DAR continues to make a meaningful impact through local, national, and global initiatives. "We are honored to support an organization whose enduring mission aligns with our values and commitment to community" said Jackson Johnson, JGA President. "This partnership marks a significant milestone for Johnson Global Advisory as we expand our philanthropic efforts and invest in organizations creating lasting, positive change". "Thank you JGA for this impactful donation will allow our chapter to continue our mission" said Jill Mathieu, Regent of DAR. To explore more about the impact of DAR, visit: www.dar.org/discover 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.

Joe Lynch to speak at 40th Midyear SEC Reporting & FASB Forum

May 28, 2025

Johnson Global Advisory ("JGA") is proud to announce that Joe Lynch, Shareholder and Managing Director, will be speaking on a panel at the 40th Midyear SEC Reporting & FASB Forum . Joe will deliver the PCAOB update on June 6, with attendance available both in person and virtually. This panel will summarize the activities of the PCAOB including: • Understand the current regulatory landscape and emerging issues under new SEC leadership • Summarize rulemaking from the FASB’s technical agenda, including segment reporting and disaggregation of income statement expenses • Anticipate accounting and reporting issues incurred with income taxes, including ASU 2023-09 “Improvements to Income Tax Disclosures” • Identify changes from the FASB on accounting for financial instruments • Prepare for disclosure requirements on ESG and climate change, including the EU’s Corporate Sustainability Reporting Directive (CSRD), the requirements of California’s ESG disclosures legislation and the status of the SEC final rule • Recall recent developments and the most frequent comment areas in the SEC review process Click here to register and learn more. 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.

QC 1000 Implementation: Key Themes and Guidance from the PCAOB Workshop

May 28, 2025

On May 13th, 2025, the PCAOB held a QC 1000 workshop in Washington, DC, providing critical insights into the upcoming quality control standard. With the effective date of December 15th, 2025 , firms must proactively identify and manage quality risks by setting quality objectives, assessing risks, and implementing responses. Examples and case studies with breakout groups played a crucial role to help firms understand and apply each stage of the implementation process, from risk assessment to monitoring and remediation. Many attendees are still early in their understanding of the standard, highlighting the need for clear guidance and support. In a live poll, a significant portion of the workshop attendees indicated they have not yet started implementation. The inspection approach of QC 1000 has not been finalized. As such, they did not take any questions regarding how this would be inspected in its formative years. However, we did read between the lines from a different question around audit documentation, that it’s possible they may select components on a test basis during an inspection. Background of the Standard The QC 1000 standard emphasizes the integration of eight components: the risk assessment process, governance and leadership, ethics and independence, acceptance and continuance of engagements, engagement performance, resources, information & communication, and monitoring and remediation process. For more background information on QC 1000, please see these JGA resources: Applying the QC 1000 and Other Standards to Your Firm Understanding the Broader Benefits of ISQM 1 and SQMS 1 Applying the Benefits of ISQM 1 & SQMS 1 Across the Firm Key Topics from the Workshop Key terms such as applicable professional and legal requirements (APLR), firm personnel, other participants, and third-party providers were defined to clarify roles and responsibilities within the firm's QC system. The workshop included a walkthrough of Appendix A2 of the standard. The firm’s system must consider the APLRs that are applicable to the firm, which is unique to each firm. APLR is defined in the standard as: Professional standards, as defined in PCAOB Rule 1001(p)(vi); Rules of the PCAOB that are not professional standards; and To the extent related to the obligations and responsibilities of accountants or auditors in the conduct of engagements or in relation to the QC system, rules of the SEC, other provisions of U.S. federal securities law, ethics laws and regulations, and other applicable statutory, regulatory, and other legal requirements. It is important to be able to clearly identify the type of resource in your QC 1000 implementation journey. Paragraph .05 also discusses the terms firm personnel, other participants and third-party providers. These are defined in Appendix A.5 (firm personnel), A.7 (other participants) and A.13 (third -party providers). 1. Firm personnel include: EQR (inside the firm), Staff at shared service centers, secondees and leased staff, specialists employed by the firm. 2. Other participants include other auditors, EQR (outside the firm), internal auditors of the client that provide direct assistance to the auditors, specialists engaged by the firm, Networks, and external QC function. 3. Third-party providers include audit software providers, system security vendor, audit methodology provider, confirmation intermediary, pricing services, and broker-dealer monitoring systems. There are four distinct roles and responsibilities as described in paragraphs .11 -.17 of the QC standard. The first two roles are the certifiers of the Firm’s QC results: 1. The principal executive officer and 2. Individual responsible for the operational responsibility and accountability for the QC system as a whole. The principal executive officer (PEO) is ultimately responsible for the design, implementation, operation, and evaluation of the firm’s QC system. Only firm personnel are permitted to fill the roles required by QC 1000 . JGA Insights: 1. Not all “participants” of a firm’s structure must be included in a firm's quality control policies and procedures, which is especially important for shared service centers and outsourced staffing arrangements. These roles must be clearly defined and applied as the different levels of participants within an organization are considered differently by the standard. 2. PCAOB-registered firms of all sizes – regardless of whether the firm currently audits issuers – must adhere to these components, ensuring consistency with international quality control frameworks. 3. While it was expressed in the session by PCAOB Staff that firms are not expected to reengineer their process (e.g. more than 1 set of QC documentation), firms may need to align or “top-up” their processes with multiple standards to ensure comprehensive compliance. Keep in mind here that the top-up may not just be for QC 1000. In fact, a system in compliance with QC 1000 may need top-up considerations for SQMS 1 and/or ISQM 1. Risk Assessment Principles There were several examples and case studies to go through among table groups during the session. These activities helped illustrate the importance of getting risk assessment right, since this drives what the firm focuses on for an effective system. When it comes to implementing QC 1000, there are some key takeaways from the risk assessment process that can really guide firms in the right direction. JGA Insights: Here are a few important points to keep in mind as you work through identifying and assessing quality risks 1. The QC 1000 standard does not prescribe a specific method for identifying and assessing quality risks. This gives firms flexibility but also places responsibility on each firm individually based on their circumstances. It’s more work upfront from a “cookie-cutter” approach but ensures the design of a process that fits a firm’s unique context. 2. Quality risks should not be viewed as the opposite of quality objectives . Instead, they are factors that could potentially hinder the achievement of those objectives. 3. The threshold of “reasonable possibility of occurring” applies to all risks, including risks of intentional misconduct by firm personnel and other participants. This means that firms must consider the likelihood of risks occurring and their potential impact on the quality objectives. The PCAOB staff shared during the workshop that the concept of reasonably possible follows the same definition as used in FASB ASC Topic 450 on Contingencies. Ethics and Independence Considerations The QC 1000 standard does not alter existing ethics and independence requirements under PCAOB or SEC standards. Firms must continue to comply with those as currently written. Compared to other standards like ISQM 1 and SQMS 1, QC 1000 is more stringent in certain areas. For example, it requires: 1. Creating and maintaining a restricted entity list; 2. Periodic review of the list to ensure accuracy; 3. Appropriate certifications related to independence; and 4. Audit committee approvals where applicable. Register for the next workshop and get going on implementation To gain a deeper understanding of the QC 1000 standard and its implementation, we strongly encourage you to attend the PCAOB Smaller Firm Workshop on June 17, 2025, in Irving, Texas. This in-person-only session will provide valuable insights and practical guidance for firms navigating the new quality control standard. Register now to secure your spot. As always, reach out to your JGA Expert with any questions. 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.

Joe Lynch, JGA Managing Director to Speak at AICPA® & CIMA® ENGAGE 25+

April 25, 2025

WASHINGTON, D.C.: Johnson Global is pleased to announce that Joe Lynch, JGA Managing Director will speak at the AICPA® & CIMA® ENGAGE+ 25 on May 15, 2025, and will be attending the full conference on June 9–12, 2025, at the ARIA Resort & Casino in Las Vegas, NV and live online. This CPE-eligible event is the premier annual event for accounting and finance professionals, bringing together thousands of peers, experts, and industry leaders for top-tier learning, networking, and career growth opportunities. Register by May 1, 2025, to take advantage of Early Bird rates— $1,995 for members ( regularly $2,095 ) and $2,445 for nonmembers ( regularly $2,545 ). *PCPS, Tax and PFP section members and CITP®, PFS™, CGMA® credential holders save an additional $150 . Discount reflected in section member/credential pricing during checkout. Register Today ! 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.

JGA to Sponsor 2025 ALI-CLE Accountants' Liability Conference

March 21, 2025

WASHINGTON, D.C.: Johnson Global Advisory (JGA) is proud to sponsor the Accountants' Liability Conference hosted by ALI-CLE. This two-day event will take place in Washington, D.C. and virtually on June 2nd and 3rd. This is an excellent opportunity to gain valuable insights into a wide range of critical issues. The 2025 conference will focus on audits and oversight, providing essential guidance to help you navigate the evolving landscape of regulatory compliance and better protect your firm and clients. “We are pleased to sponsor this conference for the last several years. This event brings together top law firms, internal counsel, and risk experts for dynamic discussions on trending topics such as accounting liability and other important issues affecting the profession,” said Jackson Johnson, JGA President. “I look forward to personally engaging with participants, presenters, and stakeholders at this conference.” This year’s program is still being finalized but planned topics include: Recent Trends in Accounting Litigation Living in a post- Jarkesy world The future of enforcement PCAOB inspection program update SEC perspectives on gatekeeper liability AI and emerging technologies in the accounting industry Accounting firms entering the legal space International firm considerations Alternative practice structures and AICPA independence rules Register by April 25 to attend in-person and use the code “ JGA ” to save $250 off . OR, for webcast attendance, use the code " JOHNSON " to save $125 off the tuition. Click here to register. About Johnson Global Advisory JGA is dedicated to helping public accounting firms around the globe achieve the highest level of audit quality. All CPAs and former PCAOB inspection staff, JGA professionals are passionate and practical about working alongside firm leadership to ensure the right controls, policies, and practices are implemented throughout the organization. Visit www.johnson-global.com to learn more about Johnson Global.

JGA Makes Third Annual Contribution to The Boys & Girls Club of Greater Kansas City

March 21, 2025

WASHINGTON, D.C.: Johnson Global Advisory (JGA) makes third annual contribution to the Boys & Girls Club of Greater Kansas City. The 29th Annual Kids Night Out is scheduled for Saturday, April 26, 2025, and promises to be an unforgettable evening, bringing together over 1,500 guests to support the children served by Boys & Girls Clubs of Greater Kansas City. “We’re thrilled to continue our support for the Boys & Girls Club of Greater Kansas City. This marks our third year backing this chapter, and I know that many of our JGA employees have personally benefited from the programs the Boys & Girls Clubs offer nationwide,” said Jackson Johnson, JGA President. “Kids Night Out is Boys & Girls Clubs of Greater Kansas City’s biggest fundraiser each year– and all dollars raised stay right here in Kansas City”, said Andy Burczyk, Board Member and Chair of Kids Night Out. “This organization is doing extraordinary things, and it is because we as a community invest in their impact.” For over 100 years, Boys & Girls Clubs of Greater Kansas City has provided a safe, supportive environment for youth. Serving over 8,000 kids and teens annually across 11 locations, the organization helps young people achieve their full potential through programs that promote academic success, healthy lifestyles, and character development. Through mentoring and leadership training, they equip members with the skills needed for success now and in the To learn more information on the Boys & Girls Club of Greater Kansas City and their work with the youth, please visit www.bgc-gkc.org . About Johnson Global Advisory JGA is dedicated to helping public accounting firms around the globe achieve the highest level of audit quality. All CPAs and former PCAOB inspection staff, as well as JGA professionals, are passionate and practical about working alongside firm leadership to ensure the right controls, policies, and practices are implemented throughout the organization. Visit www.johnson-global.com to learn more about Johnson Global.

Johnson Global Advisory Supports Sustainable Harvest International

March 21, 2025

WASHINGTON, D.C.: Johnson Global Advisory (JGA) is proud to provide a financial contribution to Sustainable Harvest International (“SHI”). SHI is a nonprofit helping Central American farmers adopt sustainable farming practices for over 27 years. Their mission is to address the destruction of tropical forests caused by slash-and-burn farming and logging. SHI’s mission benefits both current and future generations by equipping farmers with the knowledge to farm sustainably. “We’re proud to partner with Sustainable Harvest International in their important work,” said Jackson Johnson, JGA President. “This collaboration helps drive lasting, positive changes and by backing such vital organizations, we stay true to our mission of giving back and making a real difference. JGA’s philanthropic efforts focus on supporting organizations that are important to our people. I appreciate Vernon sharing his experience as a board member and we are grateful to work with him to amplify this organization.” Vernon Johnson, JGA Director, is a Board Member and Treasurer for SHI. He is actively involved in this organization. "My nonprofit work has helped me maintain perspective in both life and at work,” said Vernon. “It’s taught me to stay calm during challenges and focus on the bigger picture. This experience has improved my relationships and made me more resilient in stressful situations. My advice to busy professionals is to step back, appreciate the simple things, and not sweat the small stuff—being thankful and present can make a big difference." To learn more about SHI, visit www.sustainableharvest.org/donate . About Johnson Global Advisory JGA is dedicated to helping public accounting firms around the globe achieve the highest level of audit quality. All CPAs and former PCAOB inspection staff and JGA professionals are passionate and practical about working alongside firm leadership to ensure the right controls, policies, and practices are implemented throughout the organization. Visit www.johnson-global.com to learn more about Johnson Global.

ISQM 1, SQMS 1: Influencing the Firm on the Benefits Beyond Compliance (Part II)

February 26, 2025

The implementation of the System of Quality Management (SQM) is not just a compliance requirement but an opportunity to drive significant business value. By aligning firm-wide goals, improving internal processes, and optimizing controls, firms can streamline their operations, reduce inefficiencies, and improve overall performance. The process also provides an opportunity for firms to gain valuable insights through key metrics, enabling data-driven decisions which provide strategic business insights, enhances audit quality, and promotes employee retention. In addition, early adopters who focus on the business value from the outset see improvements that reach across different practices within the firm, making the SQM implementation a strategic investment that benefits the whole firm long-term. We have seen that our work in this area results in meaningful improvements to the way the business of audit and assurance is conducted, and many of these improvements will have benefits that reach across other practices of the firm. This is part II of a series on the benefits of SQM implementation. This article builds on our insights from 2022 in Part I of this series . Compliance as a Driver Compliance is the main driver of the new System of Quality Management (for all standard-setters, referred to as “SQM”) standards issued by the IAASB, AICPA, and the PCAOB. There is no disputing that. However, for the early adopters, what we are finding is immense business value that come out of this process; more so if you start the process with business value in mind. Our ability to anticipate the benefits of executing ISQM 1 years ago is a key strength. Some firms have already implemented ISQM 1 at some level (partial adoption for group audits, for example). For SQMS 1 and QC 1000, since firms are all in various stages preparing for the December 15, 2025, go-live date, now is the time to lay out the strategic value drivers from this compliance exercise. Related: See a breakdown of the various implementation dates here . SQM implementation requires firms to take a closer look at their internal process; every process that touches the value chain of getting an audit done. To demonstrate how this requirement goes beyond the confines of the “audit practice”, consider these examples: Employee onboarding, training, and retention; Software tools and technology used to monitor internal aspects like independence; Tools used by engagement teams, for example, to test 100 percent of smart contracts or select journal entries to examine for fraud; Archiving of binders on time, and in compliance with audit documentation requirements; or Monitoring programs that identify and fix deficiencies in both audit performance and the underlying functions supporting the audit. Getting Buy-In, Aligning Goals, and Engaging Personnel We have seen firm quality leaders struggling to get the buy-in needed from stakeholders across the business (IT, HR, Tax, Advisory) for effective SQM implementation. And we have heard leadership from firms around the world ask: “What’s in it for us?” “All this investment just for a compliance exercise?” “Why do I need to be involved in something the audit group has to do?” But the best question we’ve heard is: “How can the system of quality management implementation improve our business?” When everyone is working toward the same objectives and goals, implementation becomes a cohesive and streamlined process. It’s important to have goals that are aligned throughout the organization, with them tailored to the component and roles within those areas. This includes: Getting the invested support from the partnership board down to process owners; Having goals that are specific and measurable (e.g. documenting the current process and eventually operating controls consistently and timely); Aligning the firm’s tone-at-the-top helps get everyone in sync; and Reinforcing management’s responsibility to establish a culture of quality and its importance in all the services performed by the firm. Management should: Lay out the long-term benefits of improved business performance, reduced risks, more timely and accurate data created which leads to insightful decisions; Emphasize the benefits of overall reduced costs related to non-compliance with network, firm, peer review, and regulators requirements; and Evaluate the potential for lower costs of insurance upon implementation and overtime. Understanding Current Processes Conducting interviews, gathering data, and documenting the processes within the firm’s system of quality management allows visibility of how these processes currently work (or don’t work). When SQM implementation project leaders invite personnel involved in a process together into one room and facilitates an open discussion, a clear picture of how each process really works materializes, and this strengthens cross-functional teaming. For instance, these meetings often result in the realization that two (or more) people are doing the same tasks (inefficiency) or discovering that no one is performing an important review check (gap). Formalizing and Optimizing Processes Once the current process is understood (“As-Is”) and with the right people in the room, the identification of areas where procedures can be more uniform, streamlined or simplified emerges. We often find that processes can be improved without adding more controls. This optimization effort incorporates standardization and normalization across the firm’s services and business functions providing benefit beyond the compliance exercise of the audit practice. Gaining Business Insights A sound system of quality management will bring new business insights and transparency to make confident decisions with reliable data. The optimization process will identify the key information used in the system of quality management (a similar concept to the work auditors performs with their companies as described here). This information provides new insights to help process owners and firm leaders make decisions. A firm can develop key quality metrics that are used to measure and improve the operation of the firm and audit quality which results in a modernized competitive firm. When a firm establishes a system to monitor the SQM environment, these insights allow for timely monitoring which enables leaders to quickly make decisions that address anomalies or negative trends as they arise. Getting Started Early Getting started early begins with: Firm leadership embracing the need for a consistent and well-monitored SQM to improve the business; Aligning objectives and goals for all firm personnel based on their role within the SQM; Disseminating to all firm personnel the importance of how their role contributes to the SQM; and Incentivizing all firm personnel to commit to their SQM objectives and goals which contributes to the benefits of these modern practices that lead to competitiveness. While compliance may be the hand forcing you forward, the upside to this “exercise” is that undoubtedly you will be a stronger, more efficient firm when executed correctly. We see firms that begin with such a mindset have more success internally and in the marketplace. Conclusion The journey of implementing a quality management system is transformative. Beyond compliance, it reveals deep insights and benefits, positioning firms at an advantage in our profession. For more information, reach out to your JGA audit quality expert. Jackson Johnson , JGA President and Founder, is a seasoned expert in audit quality and technical accounting matters. With nearly six years of experience at the PCAOB, he has worked with small and medium-sized accounting firms globally, focusing on firm quality control and ICFR audits. Jackson advises firms in PCAOB and SEC investigations related to cryptocurrency audits and has served on the Enforcement Advisory Committee of the California Board of Accountancy. Before his tenure at the PCAOB, he worked with public and private clients at Grant Thornton LLP in Boston, Los Angeles, and Hong Kong. Jackson is also a frequent speaker on quality control and enforcement issues in the accounting industry. Joe Lynch , JGA Managing Director and Shareholder, and a member of the AICPA Quality Management Implementation Task Force. Joe works with mid-market public accounting firms worldwide to implement quality management programs that integrate technology and process to improve the delivery of audits. Joe spent more than six years as an Inspection Leader at the PCAOB, he conducted inspections of quality control and global issuer audits at large firms in the US as well as foreign affiliate firms, focusing on examining quality control and the design and implementation of audit work. Joe also has experience supporting financial service industry audit teams at a Big Four firm. In addition, his experience includes active-duty service in the US Air Force and supporting companies with IT strategic initiatives such as designing the IT framework for technology departments as well as leading implementations of ERPs and systems.

PCAOB Withdraws Firm & Engagement Metrics Rule from SEC Approval Process

February 25, 2025

The Public Company Accounting Oversight Board (PCAOB) recently decided to withdraw proposed rules that would have required registered firms to report a significant new set of firms and engagement metrics. It was also set to mandate that large accounting firms submit financial statements to the U.S. Regulator, as part of a wider effort to enhance oversight. This decision came after criticisms from a variety of stakeholders from both the PCAOB and SEC comment process. For example, the American Institute of CPAs (AICPA) expressed concerns that these requirements could harm U.S. capital markets and negatively impact small and midsized audit firms, potentially driving them out of the public company auditing practice. The PCAOB's decision to withdraw the rules was seen as a positive move by the AICPA, which had urged the Securities and Exchange Commission (SEC) to refrain from approving the rules due to the significant challenges they posed. JGA commented to the SEC on the proposal; you can read our position on the proposal here .

Johnson Global Advisory Releases Updated 2025 Guide to Help PCAOB-Registered Firms Navigate the Inspection Process

January 17, 2025

WASHINGTON, D.C.: Johnson Global Advisory (JGA) has published a new third edition guide examining the key considerations faced by public company auditors during their PCAOB inspections. Drawing experience as audit and audit regulation experts and advisors to firms worldwide on all aspects of audit quality improvement, the JGA team has authored NAVIGATING PCAOB INSPECTIONS: Understanding the Inspection Process from Start to Finish.