The inspection division of the Public Company Accounting Oversight Board said that there's room for improvement in how the young agency conducts its inspections of auditing firms.

The Office of Internal Oversight and Performance Assurance's report on the board's Division of Registration and Inspections found that, as of October 2005, the division was in the middle of its second cycle of full-scope inspections.

In 2003, the division conducted "limited" inspections of the four largest accounting firms. The division inspected 99 firms in 2004, and had completed field work for 218 of the 284 inspections planned for 2005.

Under the Sarbanes-Oxley Act, the PCAOB is required to inspect firms that provide audit reports for more than 100 issuers of financial statements once a year, and at least once every three years for firms with one to 100 issuer-clients.

The review made five recommendations to the division, suggesting it:

  • Apply lessons learned while re-engineering the small-firm inspections to other aspects of the program, including inspections of the eight largest firms;
  • Clarify the requirements of the board's document-retention policy as it applies to inspections;
  • Improve the organization and accessibility of existing guidance;
  • Communicate the division's training strategy and approach; and,
  • Work to ensure that decisions on upgrades to the scheduling system are based on a documented analysis of costs and benefits.

A public summary of the review is available at

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