Public Company Accounting Oversight Board PCAOB

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PCAOB Release No 104 2017 072A, 2016 INSPECTION OF EAST WEST ACCOUNTING SERVICES LLC. In 2016 the Public Company Accounting Oversight Board PCAOB or the. Board conducted an inspection of the registered public accounting firm East West. Accounting Services LLC the Firm pursuant to the Sarbanes Oxley Act of 2002 the. Inspections are designed and performed to provide a basis for assessing the. degree of compliance by a firm with applicable requirements related to auditing issuers. For a description of the procedures the Board s inspectors may perform to fulfill this. responsibility see Part I C of this report which also contains additional information. concerning PCAOB inspections generally The inspection included a review of portions. of an issuer audit This review was intended to identify whether deficiencies existed in. the reviewed audit work and whether such deficiencies indicated defects or potential. defects in the Firm s system of quality control over audits In addition the inspection. included a review of policies and procedures related to certain quality control processes. of the Firm that could be expected to affect audit quality. The Board is issuing this report in accordance with the requirements of the Act. The Board is releasing to the public Part I of the report and portions of Part IV of the. report Part IV of the report consists of the Firm s comments if any on a draft of the. report If the nonpublic portions of the report discuss criticisms of or potential defects in. the firm s system of quality control those discussions also could eventually be made. public but only to the extent the firm fails to address the criticisms to the Board s. satisfaction within 12 months of the issuance of the report Appendix A presents the text. of the paragraphs of the auditing standards that are referenced in Part I A in relation to. the description of auditing deficiencies there, Note on this report s citations to auditing standards On March 31 2015 the. PCAOB adopted a reorganization of its auditing standards using a topical structure and. a single integrated numbering system See Reorganization of PCAOB Auditing. Standards and Related Amendments to PCAOB Standards and Rules PCAOB Release. No 2015 002 Mar 31 2015 The reorganization became effective as of December 31. 2016 Citations in this report reference the reorganized PCAOB auditing standards. PCAOB Release No 104 2017 072A,Inspection of East West. Accounting Services LLC,February 27 2017,PROFILE OF THE FIRM1. Offices 1 Miami Florida,Ownership structure Limited liability company.
Partners professional staff2 1 None,Issuer audit clients 1. Lead partners on issuer audit work3 1, The information presented here is as understood by the inspection team. generally as of the outset of the inspection based on the Firm s self reporting and the. inspection team s review of certain information Additional information including. additional detail on audit reports issued by the Firm is available in the Firm s filings with. the Board available at http pcaobus org Registration rasr Pages RASR Search aspx. The number of partners and professional staff is provided here as an. indication of the size of the Firm and does not necessarily represent the number of the. Firm s professionals who participate in audits of issuers The number of partners cited. above represents the number of individuals with an ownership interest in the Firm. The number of lead partners on issuer audit work represents the total. number of Firm personnel not necessarily limited to personnel with an ownership. interest who had primary responsibility for an issuer audit as defined in AS 1201. Supervision of the Audit Engagement during the twelve month period preceding the. outset of the inspection,PCAOB Release No 104 2017 072A. Inspection of East West,Accounting Services LLC,February 27 2017. INSPECTION PROCEDURES AND CERTAIN OBSERVATIONS, Members of the Board s inspection staff the inspection team conducted.
primary procedures for the inspection from July 25 2016 to July 28 2016 4. A Review of Audit Engagement, The inspection procedures included review of portions of one issuer audit. performed by the Firm The inspection team identified matters that it considered to be. deficiencies in the performance of the work it reviewed. The description of the deficiency in Part I A of this report includes at the end of. the description of the deficiency references to specific paragraphs of the auditing. standards that relate to that deficiency The text of those paragraphs is set forth in. Appendix A to this report The references in this sub Part include only standards that. primarily relate to the deficiency they do not present a comprehensive list of every. auditing standard that applies to the deficiency Further certain broadly applicable. aspects of the auditing standards that may be relevant to a deficiency such as. provisions requiring due professional care including the exercise of professional. skepticism the accumulation of sufficient appropriate audit evidence and the. performance of procedures that address risks are not included in any references to the. auditing standards in this sub Part unless the lack of compliance with these standards. is the primary reason for the deficiency These broadly applicable provisions are. described in Part I B of this report, One of the deficiencies identified was of such significance that it appeared to the. inspection team that the Firm at the time it issued its audit report had not obtained. sufficient appropriate audit evidence to support its opinion that the financial statements. were presented fairly in all material respects in accordance with the applicable. For this purpose primary procedures include field work other review of. audit work papers and the evaluation of the Firm s quality control policies and. procedures through review of documentation and interviews of Firm personnel Primary. procedures do not include 1 inspection planning which is performed prior to primary. procedures and 2 inspection follow up procedures wrap up analysis of results and. the preparation of the inspection report which extend beyond the primary procedures. PCAOB Release No 104 2017 072A,Inspection of East West. Accounting Services LLC,February 27 2017, financial reporting framework In other words in this audit the auditor issued an opinion. without satisfying its fundamental obligation to obtain reasonable assurance about. whether the financial statements were free of material misstatement. The fact that one or more deficiencies in an audit reach this level of significance. does not necessarily indicate that the financial statements are materially misstated It is. often not possible for the inspection team based only on the information available from. the auditor to reach a conclusion on those points, Whether or not associated with a disclosed financial reporting misstatement an.
auditor s failure to obtain the reasonable assurance that the auditor is required to obtain. is a serious matter It is a failure to accomplish the essential purpose of the audit and it. means that based on the audit work performed the audit opinion should not have been. The audit deficiency that reached this level of significance is described below. A 1 Issuer A, the failure to plan and perform an audit to provide a reasonable basis for. an audit opinion AS 1101 paragraph 03 AS 1105 paragraph 04 AS. 2101 paragraphs 08 and 10 AS 2105 paragraph 03 AS 2110. paragraph 04 AS 2301 paragraph 08 and AS 2810 paragraphs 30 and. Inclusion in an inspection report does not mean that the deficiency. remained unaddressed after the inspection team brought it to the Firm s attention. Depending upon the circumstances compliance with PCAOB standards may require. the Firm to perform additional audit procedures or to inform a client of the need for. changes to its financial statements or reporting on internal control or to take steps to. prevent reliance on its previously expressed audit opinions The Board expects that. firms will comply with these standards and an inspection may include a review of the. adequacy of a firm s compliance with these requirements either with respect to. previously identified deficiencies or deficiencies identified during that inspection Failure. by a firm to take appropriate actions or a firm s misrepresentations in responding to an. inspection report about whether it has taken such actions could be a basis for Board. disciplinary sanctions,PCAOB Release No 104 2017 072A. Inspection of East West,Accounting Services LLC,February 27 2017. B Auditing Standards, The deficiency described above could relate to several applicable provisions of. the standards that govern the conduct of audits The paragraphs of the standards that. are cited for the deficiency are those that most directly relate to the deficiency The. deficiency also relates however to other paragraphs of those standards and to other. auditing standards including those concerning due professional care responses to risk. assessments and audit evidence, Many audit deficiencies involve a lack of due professional care AS 1015 Due.
Professional Care in the Performance of Work paragraphs 02 05 and 06 requires. the independent auditor to plan and perform his or her work with due professional care. and sets forth aspects of that requirement AS 1015 paragraphs 07 through 09 and. AS 2301 The Auditor s Responses to the Risks of Material Misstatement paragraph. 07 specify that due professional care requires the exercise of professional skepticism. These standards state that professional skepticism is an attitude that includes a. questioning mind and a critical assessment of the appropriateness and sufficiency of. audit evidence, AS 2301 paragraphs 03 05 and 08 requires the auditor to design and. implement audit responses that address the risks of material misstatement and AS. 1105 Audit Evidence paragraph 04 requires the auditor to plan and perform audit. procedures to obtain sufficient appropriate audit evidence to provide a reasonable basis. for the audit opinion Sufficiency is the measure of the quantity of audit evidence and. the quantity needed is affected by the risk of material misstatement in the audit of. financial statements and the quality of the audit evidence obtained The. appropriateness of evidence is measured by its quality to be appropriate evidence. must be both relevant and reliable in providing support for the related conclusions. The paragraphs of the standards that are described immediately above are not. cited in Part I A unless those paragraphs are the most directly related to the relevant. deficiency, B 1 List of Specific Auditing Standards Referenced in Part I A. The table below lists the specific auditing standards that are referenced in Part. I A of this report cross referenced to the issuer audit for which each standard is cited. PCAOB Release No 104 2017 072A,Inspection of East West. Accounting Services LLC,February 27 2017,PCAOB Auditing Standards Issuer. AS 1101 Audit Risk A,AS 1105 Audit Evidence A,AS 2101 Audit Planning A.
AS 2105 Consideration of Materiality in Planning A. and Performing an Audit,AS 2110 Identifying and Assessing Risks of A. Material Misstatement,AS 2301 The Auditor s Responses to the Risks of A. Material Misstatement,AS 2810 Evaluating Audit Results A. C Information Concerning PCAOB Inspections that is Generally Applicable to. Triennially Inspected Firms, A Board inspection includes a review of certain portions of selected audit work. performed by the inspected firm and a review of certain aspects of the firm s quality. control system The inspections are designed to identify deficiencies in audit work and. defects or potential defects in the firm s system of quality control related to the firm s. audits The focus on deficiencies defects and potential defects necessarily carries. through to reports on inspections and accordingly Board inspection reports are not. intended to serve as balanced report cards or overall rating tools Further the inclusion. in an inspection report of certain deficiencies defects and potential defects should not. be construed as an indication that the Board has made any determination about other. aspects of the inspected firm s systems policies procedures practices or conduct not. included within the report,PCAOB Release No 104 2017 072A.
Inspection of East West,Accounting Services LLC,February 27 2017. C 1 Reviews of Audit Work, Inspections include reviews of portions of selected audits of financial statements. and where applicable audits of internal control over financial reporting ICFR For. these audits the inspection team selects certain portions of the audits for inspection. and it reviews the engagement team s work papers and interviews engagement. personnel regarding those portions If the inspection team identifies a potential issue. that it is unable to resolve through discussion with the firm and any review of additional. work papers or other documentation the inspection team ordinarily provides the firm. with a written comment form on the matter and the firm is allowed the opportunity to. provide a written response to the comment form If the response does not resolve the. inspection team s concerns the matter is considered a deficiency and is evaluated for. PCAOB Release No 104 2017 072 2016 INSPECTION OF EAST WEST ACCOUNTING SERVICES LLC Preface In 2016 the Public Company Accounting Oversight Board PCAOB or the

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