The Public Company Accounting Oversight Board (PCAOB) expects that approximately 40% of the audits they reviewed in 2022 will have had at least one deficiency - meaning the audit firm failed to obtain sufficient evidence to back up its opinion. These deficiencies are being blamed, at least in part, on higher levels of staff turnover, reliance on less experienced staff and a shortage of accountants as older accountants retire and are not replaced with a sufficient number of new professionals. The PCAOB is finding an exceptionally high number of deficiencies for auditors in China and Hong Kong, which are being reviewed by the PCAOB for the first time.

Unfortunately, as these deficiencies are identified by the PCAOB, it may lead to increased scrutiny of the audits for those companies for which the PCAOB has identified a deficiency by the auditor. Such additional scrutiny could then lead to withdrawal of audit opinions, the disclosure that previously issued financial statements cannot be relied upon, or the finding of material weaknesses in a company's internal control over financial reporting due to the failure to adequately document its financial results. Given the issues that auditors are having, companies should pay special attention to their internal control over financial reporting function in an attempt to make sure that their transactions are sufficiently documented in an attempt to avoid having a material weakness, or worse, in the future.