The Public Company Accounting Oversight Board has been making progress on reducing its backlog of remediation submissions dating back to 2010 from auditing firms that have been addressing the problems found by PCAOB inspectors, according to a new report.

The report, which the PCAOB submitted earlier this month to Securities and Exchange Commission chair Mary Jo White and posted Friday to its Web site, stems from a review by the PCAOB’s Office of Internal Oversight and Performance Assurance, or IOPA. The IOPA office carried out the review last year as the PCAOB found itself falling further and further behind in recent years on the growing number of submissions from firms responding to the PCAOB’s inspection reports.

The PCAOB penalizes firms that fail to address its inspection findings in a timely way by making public previously confidential portions of the reports about defects in the quality control of the audits they perform. Audit firms need to submit evidence to the PCAOB that they have addressed the inspectors’ criticisms to the satisfaction of the PCAOB.

However, the IOPA heard in recent years a number of concerns from PCAOB board members about a backlog of remediation submissions received from audit firms for which a determination had not been finalized. As of late 2011, the PCAOB had yet to make determinations on a number of submissions that had been received more than a year earlier, according to the report. Large firms are inspected annually, while smaller firms are inspected every three years.

“For both annually and triennially inspected firms, the inventory of outstanding determination letters continued to grow through 2012,” said the report. “Board members were concerned that long delays in issuing determinations reflected poorly on the PCAOB and had the potential to dilute the usefulness of information ultimately provided to investors. Quality control defects do not become public unless they are addressed to the board’s satisfaction within the 12-month period specified in the [Sarbanes-Oxley] Act. If the board is unable to make timely remediation determinations, the public availability of information regarding any un-remediated quality control defects is further delayed.”

In response to the problems, the PCAOB’s Division of Registration and Inspections began devoting more resources in 2011 toward reducing the backlog while also changing some processes. The effort has apparently been successful and the PCAOB appears to be well on the way to eliminating the backlog this year.

For the annually inspected major firms, as of October 2013, over 80 percent of the remediation submissions received in 2010 and 2011 had been presented to and approved by the PCAOB, and the Division of Registration and Inspections was expected to make recommendations on the remaining submissions by last month. At that pace, the backlog for annual firm remediation submissions received in 2010 and 2011 should be eliminated by now.

For the trienially inspected smaller firms, the remaining inventory of 62 submissions were in various stages of the review process as of last October, compared to 89 the previous year. Thirteen of the 62 came from inspections prior to 2010, and the PCAOB staff was expected to forward recommendations for half of them by late 2013 or early 2014. The PCAOB has also reduced its average review time by 27 days, or 15 percent, compared to the previous 12-month period.

The PCAOB considers fixing the process to be essential to its task of making audits more reliable. “The remediation process is central to the board’s mission to improve the quality of audits for investors,” wrote PCAOB chairman James Doty in a letter accompanying the report. “By identifying and incenting accounting firms to correct their quality control defects, the quality control remediation process holds the potential to lead firms to improve the quality of all their future audits.”

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