The Regulator Who Cried Wolf: Why is the PCAOB Citing the Same Standards Year After Year After Year?

As children, we all heard the story of the boy who cried wolf. Leaving the sheep and wolves aside, what happens when the audit regulator continues to cite the same auditing standards year after year in its firm inspection reports? Does the PCAOB’s message lose its effectiveness? Does the public become like the townspeople who eventually stop listening or responding? 


Did you know that there are currently over 50 auditing standards that have been issued by the PCAOB? 55 to be precise. On top of that there are other various rules over ethics and independence, quality control standards, and attestation standards. Some of the auditing standards are only five paragraphs, such as AS 1010 – Training and the Proficiency of the Independent Auditor while other standards are 98 paragraphs long with as many as three appendices such as AS 2201 – An Audit of Internal Control Over Financial Reporting That is Integrated with An Audit of Financial Statements. 


Wow. That’s a lot of guidance and presents so many opportunities for audit deficiencies. And yet, surprisingly, the PCAOB seems to take issue with many of the same auditing standards year after year after year. 


After analyzing the PCAOB’s common findings, we decided to perform our own analysis of PCAOB inspection reports to evaluate the evolution of those reports over time and the nature of the findings described by the PCAOB. Perhaps not surprising, we found many of the same themes that the PCAOB self-reported. However, what was surprising is that approximately 77.8% of the PCAOB’s findings can be boiled down to just a couple auditing standards (AS 2201, AS 2301, AS 2501, AS 2810) and within those standards, the PCAOB seems to generally cite just a couple paragraphs. Add in two more standards (AS 1105 and AS 2315) and you have now accounted for approximately 90.6% of all deficiencies. 


The Process 

To start, we began by analyzing the general evolution of firm inspection reports. Understandably, early on in its formation, the PCAOB was growing and adapting as it learned what it meant to be an audit regulator. The early reports morphed almost every year. Earlier reports were organized by issue while later reports came to be organized by issuer. Sometimes the reports varied between the detail for Big Four and those for the small and mid-tier firms. Early on, there was no specific citation of auditing standards. In fact, auditing standards were not specifically referenced in the public reports until 2014. 


The PCAOB continued to modify reports over time and then with the entirely new Board appointed in 2018, the entire report changed. The inspection reports became more uniform, more condensed, and provided some context for readers to understand how to interpret the results, such as historical inspection results so that readers could understand quality trends. 


To do our analysis specifically, we took the information from all domestic inspection reports published from 2017 (after the PCAOB codified the old standards) through July 7, 2021. In Part 1 of the inspection reports, we then counted each time an auditing standard was cited (one reference to a standard equates to one deficiency, regardless of the number of paragraphs referenced). Then we began to aggregate and analyze the data. 


The Findings 

Let’s take a closer look at the findings and what they indicate: 

AS 2201 An Audit of Internal Control Over Financial Reporting That Is Integrated with An Audit of Financial Statement (35.8%) 

Surprise, surprise. Deficiencies in testing over internal controls have been a challenge since the onset of Sarbanes-Oxley. Over the last couple years, there seem to be more and more concerns related to auditor’s testing over management review controls (MRCs), but this has been the case since 2013 when the PCAOB released SAPA 11 with specific guidance over MRCs. Yet, teams continue to struggle with identifying controls to address relevant assertions, testing completeness and accuracy over information used in controls, and sufficiently testing the design and operating effectiveness of controls. What this means is that in almost 20 years since the onset of SOX, the industry still struggles to “get it right.” 


AS 2301 The Auditor’s Responses to Risks of Material Misstatement (17.5%) 

The PCAOB references a number of different paragraphs within this standard, but the general issue boils down to the fact that engagement teams fail to design and execute procedures sufficient to address the risk of material misstatement. Some of the guidance is very prescriptive; for instance, for significant and/or fraud risks, auditors must perform a test of detail (no exceptions). For all relevant assertions, engagement teams must perform substantive procedures (no exceptions). However, the overall design of the audit is inherently based on risk. Applying significant, professional, auditor judgment, engagement teams must determine the nature, timing and extent of testing to be performed, taking into account both controls and substantive procedures.  The PCAOB’s findings with respect to AS 2301 calls into question the auditor’s ability to apply judgment and effectively design audits to address the risks of material misstatement. Considering how foundational risk assessment is to the overall execution of the audit, this finding carries a lot of weight. 


AS 2501 Auditing Accounting Estimates, Including Fair Value Measurements (15.5%) 

Again, no surprise here. The continued findings involving estimates is perhaps what spurred the PCAOB to issue new guidance in a revised AS 2501 standard. But let’s be honest, that standard didn’t really change the guidance significantly. It really condensed AS 2501, AS 2502 and AS 2503 into one main standard, but the meat and bones of the audit procedures expected to test management estimates did not drastically change. Despite the continued focus over auditing estimates, firms across the industry are failing to sufficiently audit these areas. 


AS2810 Evaluating Audit Results (9.0%) 

Scanning through our findings, the deficiencies related to AS 2810 tended to fall into two main areas. First, engagement teams failed to sufficiently consider contradictory evidence. This means that teams did not sufficiently document or dispose of information that might have contradicted management assertions or engagement team conclusions. Second, auditors failed to perform sufficient procedures to conclude on specific accounting considerations and whether financial statements were appropriately presented. Both of these findings are alarming considering audits are designed to act as a check on management. So, to think that auditors are not considering contradictory evidence would inherently call into question the purpose of an audit. In addition, audits are designed to ensure that the financial statements are fairly stated (including presentation and disclosure, which is predicated on accounting considerations). So, to think that auditors are failing to sufficiently audit accounting considerations, again, makes us wonder, what is the audit actually accomplishing? 


Other Considerations 

As the table shows, there were, of course, other audit areas that are cited. And this is certainly not a complete picture of the PCAOB’s findings. This analysis represents only Part I findings, or in other words, findings that mean the auditor’s opinion is not supported. For instance, a PCAOB comment over audit committee communications would not necessarily jeopardize the audit opinion and so these types of comments have traditionally only been disclosed in Part II of inspection reports, which are private, unless a firm fails to pass remediation. Only recently with the new report format, Part I B discloses some of these findings. As well, this analysis does not take into account clean inspection reports where no Part I issues were identified. 


It is worth noting however, of all inspection reports published from 2017 to 2021 (to-date) approximately 58% of firms have at least one deficient audit. That means more than half of the industry is failing in the eyes of the PCAOB. Whoa! 


So What Does it All Mean? 

Taking a step back, what does the data mean or suggest? For us, it raises several questions: 


  • Does the PCAOB have a moving target? 
    While the PCAOB has issued new auditing standards, the standards cited above have not significantly changed in the last five years. And yet, despite the lack of significant changes, firms still seem to be missing the mark. In our work supporting firms, time and again we’ve heard engagement teams defend their work, saying, “Well, the PCAOB was okay with this during the last inspection,” only to then get a comment this year on the most recent inspection. This begs the question, does the PCAOB have a moving target? Why is it that management review controls became a hot topic in 2013 and has since yet to be resolved? Were firms sufficiently testing MRC’s prior to 2013 and then suddenly the industry shifted? Realistically, no. Rather, the PCAOB refined its knowledge and understanding and interpretation of the guidance and started issuing comments over MRCs where teams only checked for sign-off. Call a spade a spade; that’s essentially a moving target. We aren’t saying that the PCAOB can’t evolve and refine guidance and/or interpretations, but it also makes it hard to satisfy PCAOB expectations when the bar keeps apparently shifting. 


  • Are the PCAOB’s expectations unattainable? 
    Perhaps the PCAOB’s expectations are not a moving target. But are they achievable? Audits are predicated on the concept of “reasonable assurance.” What does that actually mean? When an estimate is inherently uncertain and unable to be justified with exactitude, what is defined as reasonable assurance? Despite the recurring nature of these findings, firms are struggling to meet expectations. At a certain point, the regulator has to wonder, are we being reasonable? 


  • How effective is the PCAOB remediation process? 
    As part of the PCAOB inspection process, firms have one year to remediate issues identified in Part II of the report. Part II includes quality control criticisms that are derived from the Part I findings. Most firms pass remediation, meaning the PCAOB believes the actions undertaken by the firms are sufficient to remediate the potential quality control issues present at the firm, such that they should address the inspection findings. Despite the fact that most firms pass remediation, if we’re seeing the same issues in inspection reports year over year, what does that actually say about the remediation process? Is it actually effective? Do firms understand the root cause of the issues? If a firm fails to remediate the QC criticisms, the PCAOB will release those Part II criticisms to the public. For context, this has happened a handful of times for various firms; for one of the Big Four firms, out of the 17 inspection reports published for the US firm, the PCOAB has released portions of the Part II report only twice. Is the threat of releasing Part II sufficient to encourage firms to effectively remediate issues? And is the remediation process actually working if we’re still seeing the same issues surface across the industry year after year? 


  • Is the PCAOB doing enough to provide relevant guidance? 
    When the industry continually fails to achieve expectations, it is incumbent upon the regulator to understand why. Should the PCAOB be providing more guidance to help firms improve quality and better understand expectations. On inspections, the PCAOB currently focuses on identifying the issues, but does not provide guidance on how to fix them. Even the comment forms issued after an inspection read as a “failure” without providing guidance on what could be done to improve the testing or to avoid the issue. While we realize there is no “one way” to perform an audit, perhaps in addition to identifying the failures, the PCAOB could start to offer solutions such as “here’s what you could do.” In fact, for many of us at JGA, this is what prompted us to leave the PCAOB. We got tired of merely pointing out the problem without providing solutions. Maybe it is time the PCAOB put itself in the shoes of the firms and offer guidance on what firms could have done differently to overcome the issues. 


  • What will it take for the industry to finally achieve audit quality in the eyes of the PCAOB? 
    We would be remiss to point all fingers at the PCAOB without taking some responsibility as an industry. In our role supporting firms, there are those engagement teams that put a lot of effort and barely miss the mark; when the PCAOB issues comments in these situations, it makes us wonder about “moving targets” or “unattainable expectations.” But let it also be known, there are situations where audit firms grossly miss the mark and these are the situations for which PCAOB inspections were designed; to identify audit quality concerns. These situations are where firms need to take a serious look at “what went wrong?” and take ownership over the fact that there were quality control issues. Perhaps firms need to revisit staffing and ensure jobs have the appropriate resources, both in terms of number of staff, knowledge of staff, and time allocated for engagements. Perhaps firms need to provide additional guidance, tools and templates to their staff to help enable effective quality audits. This is exactly what the remediation process is designed to do. Maybe this is a wake-up call for firms to commit more resources to ensuring all audits are performed in a quality manner. 


Not only is it the same deficiencies, but looking at reports published from 2017 through 2020, there are more and more deficiencies being cited per inspection report. That’s not a positive trend. We think the industry overall would agree that the PCAOB has brought about significant change and audit quality has improved from the turn of the century. But have we reached a plateau? What will it take to tackle these recurring issues? And is the PCAOB merely crying wolf in citing the same standards year over year over year without taking action to effectuate change? Give it enough time and people stop listening when it’s the same message and there’s no change. What will happen then when the PCAOB finally spots an actual wolf and identifies a truly egregious audit issue? 


Dane Dowell, CPA  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.

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.
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