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New audit practice alert cites examples of neglect by auditors.
The Public Company Accounting * Oversight Board issued Staff Audit Practice Alert (APA) No. 10, MaintainingandApptyingProfessicmalSkeptidsin in Auáts, on December 4,2012, intending "to remind auditors of the requirement to appropriately apply professional skepticism throughout their audits."
According to APA No. 10, "PCAOB inspectors continue to observe instances in which the circumstances suggested that auditors did not appropriately apply professional skepticism in their audits." Beyond issuing the new alert, the PC AOB said it was exploring whether it might take additional actions on this topic.
Insufficient Examination of Management Assumptions Among Audit Deficiencies Cited
To illustrate the board's observations, the APA provides a number of specific examples of auditors failing to appropriately apply professional skepticism in their audits:
For certain hard-to-value Level 2 financial instruments, [an] engagement team did not obtain an understanding of the specific methods and/or assumptions underlying the fair value estimates that were obtained from pricing services or other third parties and...