A recent report from the Public Company Accounting Oversight Board (PCAOB) reveals a divide among US accounting executives and partners regarding the impact of remote work on audit errors.
The PCAOB’s investigation sheds light on the rise of auditing errors post-pandemic and the potential role of internal culture. Although deficiency rates decreased slightly in 2023, they have seen a consistent increase since 2020. This trend raises concerns about potential legal and reputation risks for firms, emphasizing the need for a thorough examination of the factors at play.
The report is based on inspections of quality control systems and interviews with 156 executives and partners from six major firms, including Deloitte, EY, KPMG, PwC, BDO, and Grant Thornton. A significant finding was that 64% of respondents believed improving work-life balance enhances audit quality. However, about one-third of senior figures claim the contemporary remote and hybrid work culture negatively affects audit quality. They argue that remote work diminishes in-person interactions, making it harder for new recruits to assimilate into the firm’s culture, leading to a potential decline in audit control.
Additionally, some executives expressed concerns about losing the ‘apprenticeship culture’ that traditionally helped in developing talent within firms. The delayed development of personnel has reportedly impacted productivity, with managers and partners occasionally stepping down to perform audit tasks typically done by junior staff, which could result in reduced scrutiny of audit work.
Moreover, accounting firms face the challenge of attracting Gen Z talent, who prioritize a balanced work-life dynamic. These firms have reported ‘resource challenges’ due to difficulties in recruiting younger generations who often view their roles as jobs rather than long-term careers. This shift in perspective has contributed to increased audit deficiencies, as less experienced personnel might be more likely to seek other opportunities outside the profession.
Statistics from the American Institute of Certified Public Accountants (AICPA) highlight a decline in students pursuing accounting degrees, with only 65,000 graduating in the 2021-22 academic year compared to higher numbers a decade ago. Furthermore, fewer candidates are taking the CPA exam, indicating a shrinking pool of certified public accountants, which adds pressure on firms to retain talent.
Some audit firms avoid enforcing strict return-to-office policies, fearing it might drive away personnel already hard to retain. This situation compounds the challenge of ensuring robust audit quality while adapting to evolving work preferences and maintaining firm culture.
The PCAOB’s report underscores the complex challenges US accounting firms face in balancing remote work dynamics, attracting new talent, and maintaining audit quality. While some see remote work as a detriment to quality control, others view it as essential for meeting modern workforce expectations. Navigating these issues requires a nuanced approach to sustain both firm integrity and employee satisfaction.
Source: Businessinsider
