The Difference between PCAOB audits and AICPA audits
Auditing is an essential part of any type of business or organization. It helps them comply with regulations and also determine the financial health of a company for internal procedures and strategy making.
Different types of audits are performed by various companies around the world. Most of these audits are performed as per the established standards and generally accepted accounting and auditing principles. Audit firms in Singapore also conduct such audits as per global standards.
Two of the major types of audits are PCAOB audits and AICPA audits. Let’s discuss them in detail.
Overview of AICPA Audits
The AICPA was established in the 1940s, making it the oldest of the two. The more current set of self-regulatory audit standards was first established in the 1970s.
The group’s extensive range of duties includes anything from creating audit criteria for businesses of all sizes, as well as nonprofits and governmental organizations, to preparing for and grading the CPA test and public financial education initiatives.
Keeping all of these extensive audit standards and principles in mind, it is evident that a single business cannot perform all of those different jobs.
A closer look at the AICPA audit also shows it has less strict standards because it started as an auditor-friendly process. The primary purpose of an AICPA audit is to assure the stakeholders that a company’s financial statements are dependable, accurate, and devoid of substantial misstatements.
As a result, although the concurring partner’s assessment is still intended to support the process’s integrity, it is considerably shorter and less evasive. Since the PCAOB has little authority over the process, an AICPA audit has a much longer schedule and lower risk.
Overview of PCAOB Audits
A PCAOB audit is more thorough and scrutinizing than an AICPA audit, which is considered to be a softer and easier type of audit. In reality, the Public Corporate Accounting Oversight Board, established in 2002 as a component of Sarbanes-Oxley, speaks volumes just by its name and origin.
PCAOB was established as a direct reaction to the many accounting scandals of the time that together undermined investor confidence and destroyed the public’s faith in several publicly listed corporations.
PCAOB auditors have a forward-looking attitude to keep up with changes in the financial environment, given the industry’s dynamic character, assisting in maintaining investor safety.
As a result, a PCAOB audit has a clear bias in favor of a company’s stakeholders and in favor of delivering transparency, accuracy, and accountability to the investing public.
So, PCAOB auditors will provide two opinions: one analyzing the financial statements and the other, the ICFR, assessing the environment and efficacy of your controls.
Due to the risk involved and the fact that the firm is publicly traded, the auditor often has a lower materiality threshold. This is also consistent with reduced scoping materiality.
Public corporations that are registered with the Securities and Exchange Commission are the only ones subject to PCAOB audits (SEC). These audits, which are mandated by law, are carried out by independent auditing companies that are PCAOB-registered.
Sarbanes-Oxley Act of 2002 compliance and the absence of substantial misstatements in public corporations’ financial statements are the main objectives of PCAOB audits.
On the other hand, the AICPA conducts audits for a broad spectrum of customers, including for-profit businesses, nonprofits, and governmental bodies. Independent auditors who are also AICPA members do these audits.
The main goals of AICPA audits are to assist customers in streamlining their financial reporting procedures and to guarantee the accuracy of financial statements.
Each sort of audit may have a somewhat different emphasis owing to the unique rules and procedures that apply to it.
In terms of the risk, with a PCAOB audit, the repercussions when things go wrong for PCAOB auditors are far greater.
In addition to the PCAOB itself casting a shadow over the auditor, businesses also have comprehensive review procedures in place, where a committee examines each document before it is released to check for uniformity across the whole company.
Only PCAOB audits are subject to this mandated consultation; AICPA audits are not. A PCAOB audit is unquestionably more thorough and careful and casts a broader net since the materiality is lower, all with a quicker turnaround.
All in all
Overall, there are some key differences between PCAOB and AICPA audits, but they are meant to bring financial fairness, accuracy, and transparency to organizations.
In order to complete these audits in the best way possible, it is recommended that companies rely on professional audit firms in Singapore and let the experts handle them in the best way possible.