PCAOB: Audit Focus: Auditing Accounting Estimates

PCAOB: Audit Focus: Auditing Accounting Estimates

• 31 July 2025
• Audit
• South African Accounting Academy

Summary:

The Public Company Accounting Oversight Board (PCAOB) has published an edition of the Audit Focus series – on Auditing Accounting Estimates.

Article:

The purpose of this new resource is to help smaller audit firms address challenges of Auditing Accounting Estimates

This provides auditors with reminders and good practices regarding accounting estimates, an especially challenging aspect of financial statements.

This edition of Audit Focus highlights key reminders for auditors from the PCAOB standards related to auditing accounting estimates, provides the staff’s perspectives on common deficiencies in auditors’ work, and shares good practices that the staff has observed

Accounting estimates are pervasive in financial statements, often substantially affecting a company's financial position and results of operations. They generally involve subjective assumptions and measurement uncertainty, making them susceptible to management bias. Consequently, accounting estimates are often some of the areas of greatest risk in an audit.

The PCAOB’s inspection staff continue to identify deficiencies related to auditors’ testing of accounting estimates. The deficiencies include, among others, not identifying the significant assumptions used by the company to determine an accounting estimate.

This edition of Audit Focus shares:

• Key reminders for auditors concerning the PCAOB standards related to auditing accounting estimates
• Staff’s perspectives on common deficiencies in auditors’ work
• Good practices implemented by audit firms that audit smaller companies in the area of accounting estimates.

Video URL https://youtu.be/p1S_RtkfKBU 

Click here to download the 6-page document:

https://assets.pcaobus.org/pcaob-dev/docs/default-source/documents/audit-focus-aae.pdf?sfvrsn=fa507e79_2

Relevance to Auditors, Independent Reviewers & Accountants:

• As an auditor and independent reviewer, you need to be aware of and consider all the latest publications (especially guidance) by regulators and oversight bodies, like the PCAOB.

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