Preparing for 2026 Busy Season:
Key PCAOB Findings to Keep in Mind

Insights & Analysis

Background: The PCAOB’s 2025 and 2024 inspection cycles reveal consistent finding patterns across triennially inspected firms. With firms getting ready for busy season, this analysis synthesizes those findings into actionable themes to help audit teams identify areas of focus and proactively address deficiencies before they become inspection findings.

Definitions

Triennially Inspected Firms: Firms inspected by the PCAOB once every three years that annually issue fewer than 100 audit reports.

Part 1.A Findings: Deficiencies where the PCAOB concluded the firm had not obtained sufficient appropriate audit evidence to support its opinion(s) on the issuer’s financial statements and/or internal controls over financial reporting (ICFR).

Part 1.B Findings: Deficiencies where the PCAOB concluded there were instances of non-compliance with PCAOB standards or rules other than those where the firm had not obtained sufficient appropriate audit evidence to support its opinion(s).

Key Takeaways

Part 1.A Deficiencies

Revenue remains the #1 deficiency area, particularly evaluating performance obligations before revenue recognition, determining and allocating transaction price, testing accuracy/completeness of reports, and not identifying required disclosures
ICFR continues to be a challenging area, particularly evaluating control owner’s review procedures (including follow-up & resolution) and testing accuracy/completeness of data used in the control
Use of Specialists continues to be problematic—firms are not adequately evaluating their work, assumptions, and source data used to conclude on the reasonableness or appropriateness of the estimate
Estimates remains a challenge, especially when evaluating whether companies had a reasonable basis for significant assumptions used in the determination of the estimate
Journal entry testing shows systematic failures—some firms completely omit testing, while others use haphazard selection methods or fail to examine underlying support

Note: Data reliability issues permeate the top deficiencies—across revenue, ICFR, specialists, and estimates, firms consistently fail to test the accuracy and completeness of data/reports

Part 1.B Deficiencies

These deficiencies—primarily related to audit committee communications, critical audit matters (CAMs), and Form AP accuracy—have resulted in significant PCAOB fines but are largely preventable

Recommended Actions

Pre-issuance reviews – Perform (or engage external party to perform) reviews focusing on higher-risk areas, including areas subject to frequent PCAOB findings outlined in this insight
Targeted training – Facilitate training and coaching on the testing of revenue, evaluating specialist procedures, and testing journal entries; consider designating a revenue subject matter expert within the firm
Data testing – Identify data/reports used in controls, substantive procedures, and specialists’ work; perform risk assessment; and design tailored procedures to test the accuracy/completeness of data
Estimates testing – Identify critical accounting estimates and focus on evaluating basis for significant assumptions and testing accuracy/completeness of data; consider designating an estimates subject matter expert within the firm
Standardized tools – Implement templates and checklists to prevent common Part 1.B findings such as audit committee communications, CAMs, and Form AP

Detailed Findings

Part 1.A: Insufficient Audit Evidence

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Part 1.A deficiency rate (percentage of triennially inspected firms with at least one Part 1.A finding) was 48% in 2024 and 33% in preliminary 2025 results.

Rank	Theme (and Standard/Rule)	Summary of Findings
1	Revenue (AS 2301, AS 2310, AS 1105, AS 2401, AS 2305, AS 2810)	Revenue Recognition (ASC 606) Not evaluating whether the issuer met performance obligations before revenue recognition Not testing whether the issuer satisfied performance obligations prior to revenue recognition Not evaluating transaction price determination or allocation for performance obligations Not evaluating whether revenue recognition was in conformity with ASC 606 Not identifying and evaluating omissions of required disclosures under ASC 606 Data Not testing accuracy/completeness of system-generated reports used in revenue testing Not evaluating reliability of data used in revenue testing Not identifying and testing controls over accuracy/completeness of data used in revenue controls Other Not determining if expectations used in substantive analytical procedures were based on predictable relationships Not evaluating issuer’s accounting for revenue as principal vs. agent Not maintaining control over confirmations for revenue/related party transactions Sample sizes too small for revenue testing
2	ICFR Testing (AS 2201)	Not identifying or testing controls over accuracy/completeness of data used in the control Not evaluating specific review procedures that control owners performed to assess items for follow-up Not evaluating review procedures performed by control owners including resolution of identified items
3	Specialists (AS 1210)	Not evaluating accuracy/completeness of data used by company specialists Not evaluating reasonableness of assumptions used by specialists Not evaluating appropriateness of specialist’s work Not understanding specialist’s methods and assumptions
4	Accounting Estimates (AS 2301, AS 2501, AS 2810, AS 2315, AS 1105)	Assumptions Not evaluating whether issuer had reasonable basis for significant assumptions used Not performing procedures beyond inquiry to test significant assumptions Not demonstrating how reasonable basis was established for assumptions used in independent expectations Not evaluating issuer’s intent and ability to carry out assumptions Not evaluating relevance/reliability of external data used in testing assumptions Limited Procedures Not performing any procedures to test significant accounts beyond limited procedures Not identifying US GAAP departures in valuation models Not evaluating US GAAP conformity for significant account valuations
5	Journal Entries & Fraud Risk (AS 2401)	Selection Not performing any procedures to identify and select journal entries for testing Not appropriately considering fraud characteristics when selecting entries Using haphazard/random selection instead of risk-based approach Limiting testing to certain criteria without proper rationale Failing to identify all entries meeting the established criteria Testing Identifying appropriate journal entries but not examining underlying support Limiting procedures to inquiry only without substantive testing Selecting journal entries but not performing adequate procedures on them

Part 1.B: Non-Compliance with Standards

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Rank	Theme (and Standard/Rule)	Summary of Findings
1	Communications with Audit Committees (AS 1301)	Not communicating the following: significant risks, critical accounting policies/practices and estimates, other accounting firms participating in the audit, uncorrected misstatements, overview of audit strategy, related party evaluation, results of the audit prior to report issuance, going concern evaluation, quality of financial reporting.
2	Critical Audit Matters (CAM) Determination & Audit Report Issues (AS 3101, AS 3105)	Not including material matters in CAM determination procedures, CAM communication language inconsistent with audit documentation, not performing any CAM procedures, incorrect year firm began serving as auditor, audit report not addressed to board of directors, missing required information about predecessor auditor, incorrect reporting on dual-dated audit reports, missing engagement partner name disclosure, going concern explanatory paragraph in wrong location.
3	Form AP Filing & Accuracy (PCAOB Rule 3211)	Not filing Form AP by deadline, inaccurate issuer CIK number, inaccurate audit report date, omitted other accounting firm participation, inaccurate engagement partner name/Partner ID, inaccurate office issuing audit report, missing dual-date information, inaccurate audit hours calculations, and omitted previously used Partner ID.