The Center for Audit Quality has published a member alert highlighting some of the main risks it sees for auditors to watch out for as they examine financial statements for this year.

The CAQ intends to update the member alert, “Select Auditing Considerations for the 2013 Audit Cycle,” at least annually, and more frequently as needed, to identify and address complex auditing areas, including ones where regulators are focusing the most attention.

“This new alert is another example of how the public company auditing profession is proactively identifying emerging trends and responding to specific regulator concerns,” said CAQ executive director Cindy Fornelli in a statement. “By summarizing potential areas of risk, we believe this resource will be a valuable tool for CAQ member firms as they head into the 2013 audit cycle.”

The alert covers a number of auditing considerations, including internal control over financial reporting, professional skepticism, engagement quality review, accounting estimates, including fair value measurements, substantive analytical procedures, and inaccurate or omitted disclosures.

On the subject of internal control over financial reporting, for example, the alert provides a summary of a recent practice alert from the Public Company Accounting Oversight Board discussing observations on ICFR from PCAOB inspection reports. Among the topics covered are risk assessment, selecting controls to test, information technology considerations, and evaluating identified control deficiencies.

The PCAOB issued a report on Dec. 6, 2013 on registered audit firms' implementation and compliance with Auditing Standard No. 7 (AS 7), Engagement Quality Review. The PCAOB found that, while firms' methodologies generally were consistent with the requirements of AS 7, they did not always result in an appropriately executed engagement quality review. The report notes that in a number of engagements in which the PCAOB inspections staff identified audit deficiencies, the audit deficiency should have been identified by the engagement quality reviewer.

“Audit firms take the inspections process very seriously and devote significant resources to understanding and remediating any deficiencies identified by the PCAOB,” said Fornelli. “Our new alert is a step forward in these efforts.”

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