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State Board Report

March 2015

Deficiencies in important areas of audits persist, the International Forum of Independent Audit Regulators (IFIAR) reports. IFIAR’s 2014 Survey of Inspection Findings is based on the 29 IFIAR member countries’ inspection of 948 public company audits in which they found deficiencies in 47 percent. The international regulators discovered the highest number of audit inspection deficiencies in the areas of internal control testing (24 percent), fair value measurement (20 percent), and revenue recognition (14 percent) of all the inspected audits. Most of the findings are consistent with IFIAR’s prior year surveys. The inspections were primarily of audit firms affiliated with the six largest international audit firm networks.

Lewis H. Ferguson, IFIAR chair and member of the Public Company Accounting Oversight Board observed: "We continue to see high levels of inspection deficiencies in vital areas of public company audits. This is a problem for investors and stakeholders around the world."

IFIAR intends to continue monitoring developments in audit quality and is advising audit firms to: (1) develop a robust root cause analysis to gain a clearer understanding of the factors that underlie these findings and take appropriate remedial actions and (2) continue improving their auditing techniques, as well as their oversight policies and procedures.

Only seven of IFIAR’s member countries observed overall improvement in audit quality at the jurisdictional level – and one observed overall decline.

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