1666 K Street, N.W.
Washington, DC 20006
Telephone: (202) 207-9100
Facsimile: (202) 862-8433
www.pcaobus.org

Report on
2017 Inspection of Plante & Moran, PLLC
(Headquartered in Southfield, Michigan)

Issued by the

Public Company Accounting Oversight Board
September 20, 2018

THIS IS A PUBLIC VERSION OF A PCAOB INSPECTION REPORTPORTIONS OF THE COMPLETE REPORT ARE OMITTEDFROM THIS DOCUMENT IN ORDER TO COMPLY WITHSECTIONS 104(g)(2) AND 105(b)(5)(A)
OF THE SARBANES-OXLEY ACT OF 2002

PCAOB RELEASE NO. 104-2018-159

PCAOB Release No. 104-2018-159

2017 INSPECTION OF PLANTE & MORAN, PLLC
Preface
In 2017, the Public Company Accounting Oversight Board ("PCAOB" or "theBoard") conducted an inspection of the registered public accounting Plante & Moran,
PLLC ("the Firm") pursuant to the Sarbanes-Oxley Act of 2002 ("the Act").
Inspections are designed and performed to provide a basis for assessing thedegree of compliance by a firm with applicable requirements related to auditing issuers.
For a description of the procedures the Board's inspectors may perform to fulfill this
responsibility, see Part I.C of this report (which also contains additional information
concerning PCAOB inspections generally). The inspection included reviews of portionsof selected issuer audits. These reviews were intended to identify whether deficiencies
existed in the reviewed audit work, and whether such deficiencies indicated defects or
potential defects in the Firm's system of quality control over audits. In addition, theinspection included a review of policies and procedures related to certain quality control
processes of the Firm that could be expected to affect audit quality.
The Board is issuing this report in accordance with the requirements of the Act.
The Board is releasing to the public Part I of the report and portions of Part IV of thereport. Part IV of the report consists of the Firm's comments, if any, on a draft of thereport. If the nonpublic portions of the report discuss criticisms of or potential defects in
the Firm's system of quality control, those discussions also could eventually be madepublic, but only to the extent the Firm fails to address the criticisms to the Board's
satisfaction within 12 months of the issuance of the report. Appendix A presents the textof the paragraphs of the auditing standards that are referenced in Part I.A. in relation to
the description of auditing deficiencies there.
Note on this report's citations to auditing standards: On March 31, 2015, the
PCAOB adopted a reorganization of its auditing standards using a topical structure anda single, integrated numbering system. See Reorganization of PCAOB AuditingStandards and Related Amendments to PCAOB Standards and Rules, PCAOB Release
No. 2015-002 (Mar. 31, 2015). The reorganization became effective December 31,
2016. Citations in this report reference the reorganized PCAOB auditing standards.

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Page 2PROFILE OF THE FIRM1
Offices212

Ownership structure

Professional limited liability company

Partners / professional staff3

204 / 1,772

Issuer audit clients

37

Lead partners on issuer audit work4

221

The information presented here is as understood by the inspection team,
generally as of the outset of the inspection, based on the Firm's self-reporting and theinspection team's review of certain information. Additional information, including
additional detail on audit reports issued by the Firm, is available in the Firm's filings with
the Board, available at http://pcaobus.org/Registration/rasr/Pages/RASR_Search.aspx.
2

The Firm's offices are located in Chicago and Elgin, Illinois; Ann Arbor,
Auburn Hills, Clinton Township, Detroit, East Lansing, Flint, Grand Rapids, Kalamazoo,Saint Joseph, Southfield (2), and Traverse City, Michigan; Cincinnati, Cleveland,
Columbus, and Toledo, Ohio; Shanghai, People's Republic of China; Mumbai, Republicof India; and Monterrey, United Mexican States.
3

The number of partners and professional staff is provided here as anindication of the size of the Firm, and does not necessarily represent the number of the
Firm's professionals who participate in audits of issuers. The number of partners cited
above represents the number of individuals with an ownership interest in the Firm.
4

The number of lead partners on issuer audit work represents the total
number of Firm personnel (not necessarily limited to personnel with an ownershipinterest) who had primary responsibility for an issuer audit (as defined in AS 1201,
Supervision of the Audit Engagement) during the twelve-month period preceding theoutset of the inspection.

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PART IINSPECTION PROCEDURES AND CERTAIN OBSERVATIONSMembers of the Board's inspection staff ("the inspection team") conductedprimary procedures for the inspection from June 12, 2017 to June 15, 2017.5
A.

Review of Audit Engagements

The inspection procedures included reviews of portions of four issuer audits
performed by the Firm. The inspection team identified matters that it considered to be
deficiencies in the performance of the work it reviewed.
The descriptions of the deficiencies in Part I.A of this report include, at the end of
the description of each deficiency, references to specific paragraphs of the auditing
standards that relate to those deficiencies. The text of those paragraphs is set forth inAppendix A to this report. The references in this sub-Part include only the standards
that most directly relate to the deficiencies and do not include all standards that apply tothe deficiencies. Further, certain broadly applicable aspects of the auditing standards
that may be relevant to a deficiency, such as provisions requiring due professional care,including the exercise of professional skepticism; the accumulation of sufficientappropriate audit evidence; and the performance of procedures that address risks, are
not included in any references to the auditing standards in this sub-Part, unless the lackof compliance with these standards is the primary reason for the deficiency. These
broadly applicable provisions are described in Part I.B of this report.
Certain deficiencies identified were of such significance that it appeared to theinspection team that the Firm, at the time it issued its audit report, had not obtained
sufficient appropriate audit evidence to support its opinion that the financial statements
were presented fairly, in all material respects, in conformity with the applicable financial
reporting framework and/or its opinion about whether the issuer had maintained, in allmaterial respects, effective internal control over financial reporting ("ICFR"). In otherwords, in these audits, the auditor issued an opinion without satisfying its fundamental
5

For this purpose, "primary procedures" include field work, other review ofaudit work papers, and the evaluation of the Firm's quality control policies andprocedures through review of documentation and interviews of Firm personnel. Primaryprocedures do not include (1) inspection planning, which is performed prior to primaryprocedures, and (2) inspection follow-up procedures, wrap-up, analysis of results, andthe preparation of the inspection report, which extend beyond the primary procedures.

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obligation to obtain reasonable assurance about whether the financial statements were
free of material misstatement and/or the issuer maintained effective ICFR.
The fact that one or more deficiencies in an audit reach this level of significancedoes not necessarily indicate that the financial statements are materially misstated orthat there are undisclosed material weaknesses in ICFR. It is often not possible for theinspection team, based only on the information available from the auditor, to reach aconclusion on those points.
Whether or not associated with a disclosed financial reporting misstatement, an
auditor's failure to obtain the reasonable assurance that the auditor is required to obtain
is a serious matter. It is a failure to accomplish the essential purpose of the audit, and itmeans that, based on the audit work performed, the audit opinion should not have been
issued.6
The audit deficiencies that reached this level of significance are described
below–
A.1.

Issuer A(1)
the failure, in an audit of ICFR, to perform sufficient procedures totest the design and operating effectiveness of controls over revenue (AS2201.34, .39, .42, .44, and .B9);(2)
the failure to perform sufficient procedures to test the occurrence
and valuation of revenue (AS 1105.10; AS 2301.08 and .11);

6

Inclusion in an inspection report does not mean that the deficiency
remained unaddressed after the inspection team brought it to the Firm's attention.
Depending upon the circumstances, compliance with PCAOB standards may require
the Firm to perform additional audit procedures, or to inform a client of the need forchanges to its financial statements or reporting on internal control, or to take steps toprevent reliance on its previously expressed audit opinions. The Board expects thatfirms will comply with these standards, and an inspection may include a review of theadequacy of a firm's compliance with these requirements, either with respect topreviously identified deficiencies or deficiencies identified during that inspection. Failure
by a firm to take appropriate actions, or a firm's misrepresentations in responding to an
inspection report, about whether it has taken such actions, could be a basis for Board
disciplinary sanctions.

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the failure, in an audit of ICFR, to perform sufficient procedures totest the design and operating effectiveness of controls over the valuationof certain liabilities (AS 2201.34, .39, .42, .44, and .B9);(4)
the failure to perform sufficient procedures to test the valuation ofcertain liabilities, including the failure to test the accuracy andcompleteness of the issuer-provided data used by an issuer-engaged
specialist (AS 1210.12); and(5)
the failure, in an audit of ICFR, to perform sufficient procedures totest the design and operating effectiveness of information technology
general controls ("ITGCs") (AS 2201.34, 39, .42, .44, .48, and .68).
A.2.

Issuer B(1)
the failure, in an audit of ICFR, to perform sufficient procedures totest the design and operating effectiveness of controls over the allowance
for loan losses ("ALL") (AS 2201.39, .42, .44, and .68);(2)
the failure to perform sufficient procedures to test the ALL (AS
2501.11); and(3)
the failure, in an audit of ICFR, to perform sufficient procedures totest the design and operating effectiveness of controls over the accounting
for a significant transaction (AS 2201.42, and .44).

A.3.

Issuer C(1)
the failure, in an audit of ICFR, to perform sufficient procedures totest the design and operating effectiveness of controls over theoccurrence and valuation of revenue, and the existence of accounts
receivable (AS 2201.39, .42, and .44; AS 2605.24-.25);(2)
the failure to perform sufficient procedures to test the occurrence
and valuation of a revenue category, including the inadequate
performance of substantive analytical procedures (AS 1105.10; AS
2305.16); andPCAOB Release No. 104-2018-159
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the failure, in an audit of ICFR, to perform sufficient procedures totest the design and operating effectiveness of controls over the valuationof inventory (AS 2201.39, .42, and .44; AS 2605.24-.25).
B.

Auditing Standards

Each deficiency described above could relate to several applicable provisions of
the standards that govern the conduct of audits. The paragraphs of the standards thatare cited for each deficiency are those that most directly relate to the deficiency. The
deficiencies also relate, however, to other paragraphs of those standards and to otherauditing standards, including those concerning due professional care, responses to risk
assessments, and audit evidence.
Many audit deficiencies involve a lack of due professional care. Paragraphs .02,
.05, and .06 of AS 1015, Due Professional Care in the Performance of Work, require theindependent auditor to plan and perform his or her work with due professional care andset forth aspects of that requirement. AS 1015.07-.09 and paragraph .07 of AS 2301,
The Auditor's Responses to the Risks of Material Misstatement, specify that due
professional care requires the exercise of professional skepticism. These standards
state that professional skepticism is an attitude that includes a questioning mind and acritical assessment of the appropriateness and sufficiency of audit evidence.
AS 2301.03, .05, and .08 require the auditor to design and implement audit
responses that address the risks of material misstatement. Paragraph .04 of AS 1105,
Audit Evidence, requires the auditor to plan and perform audit procedures to obtainsufficient appropriate audit evidence to provide a reasonable basis for the audit opinion.
Sufficiency is the measure of the quantity of audit evidence, and the quantity needed isaffected by the risk of material misstatement (in the audit of financial statements) or therisk associated with the control (in the audit of ICFR) and the quality of the audit
evidence obtained. The appropriateness of evidence is measured by its quality; to beappropriate, evidence must be both relevant and reliable in providing support for the
related conclusions.
The paragraphs of the standards that are described immediately above are notcited in Part I.A, unless those paragraphs are the most directly related to the relevant
deficiency.

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B.1.

List of Specific Auditing Standards Referenced in Part I.A

The table below lists the specific auditing standards that are referenced in Part
I.A of this report, cross-referenced to the issuer audits for which each standard is cited.
PCAOB Auditing Standards
AS 1105, Audit EvidenceIssuers
A and CAS 1210, Using the Work of a SpecialistA

AS 2201, An Audit of Internal Control Over
Financial Reporting That is Integrated with An
Audit of Financial Statements

A, B, and C

AS 2301, The Auditor's Responses to the Risks ofMaterial Misstatement

A

AS 2305, Substantive Analytical ProceduresC

AS 2501, Auditing Accounting EstimatesB

AS 2605, Consideration of the Internal Audit
FunctionC

C.

Information Concerning PCAOB Inspections that is Generally Applicable to
Triennially Inspected Firms

A Board inspection includes a review of certain portions of selected audit work
performed by the inspected firm and a review of certain aspects of the firm's quality
control system. The inspections are designed to identify deficiencies in audit work anddefects or potential defects in the firm's system of quality control related to the firm's
audits. The focus on deficiencies, defects, and potential defects necessarily carries
through to reports on inspections and, accordingly, Board inspection reports are notintended to serve as balanced report cards or overall rating tools. Further, the inclusion
in an inspection report of certain deficiencies, defects, and potential defects should not
be construed as an indication that the Board has made any determination about otheraspects of the inspected firm's systems, policies, procedures, practices, or conduct notincluded within the report.

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C.1.

Reviews of Audit Work

Inspections include reviews of portions of selected audits of financial statements
and, where applicable, audits of ICFR. For these audits, the inspection team selects
certain portions of the audits for inspection, and it reviews the engagement team's work
papers and interviews engagement personnel regarding those portions. If the inspection
team identifies a potential issue that it is unable to resolve through discussion with thefirm and any review of additional work papers or other documentation, the inspection
team ordinarily provides the firm with a written comment form on the matter and the firmis allowed the opportunity to provide a written response to the comment form. If the
response does not resolve the inspection team's concerns, the matter is considered a
deficiency and is evaluated for inclusion in the inspection report.
The inspection team selects the audits, and the specific portions of those audits,that it will review, and the inspected firm is not allowed an opportunity to limit or
influence the selections. Audit deficiencies that the inspection team may identify include
a firm's failure to identify, or to address appropriately, financial statement
misstatements, including failures to comply with disclosure requirements,7 as well as a
firm's failure to perform, or to perform sufficiently, certain necessary audit procedures.
An inspection may not involve the review of all of the firm's audits, nor is it designed to
identify every deficiency in the reviewed audits. Accordingly, a Board inspection report
should not be understood to provide any assurance that a firm's audit work, or the
relevant issuers' financial statements or reporting on ICFR, are free of any deficiencies
not specifically described in an inspection report.
In some cases, the conclusion that a firm did not perform a procedure may bebased on the absence of documentation and the absence of persuasive other evidence,even if the firm claimed to have performed the procedure. AS 1215, Audit
Documentation, provides that, in various circumstances including PCAOB inspections, a
7When it comes to the Board's attention that an issuer's financial
statements appear not to present fairly, in a material respect, the financial position,
results of operations, or cash flows of the issuer in conformity with the applicablefinancial reporting framework, the Board's practice is to report that information to the
Securities and Exchange Commission ("SEC" or "the Commission"), which has
jurisdiction to determine proper accounting in issuers' financial statements. Any
description in this report of financial statement misstatements or failures to comply with
SEC disclosure requirements should not be understood as an indication that the SEC
has considered or made any determination regarding these issues unless otherwise
expressly stated.

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Page 9firm that has not adequately documented that it performed a procedure, obtained
evidence, or reached an appropriate conclusion must demonstrate with persuasive
other evidence that it did so, and that oral assertions and explanations alone do notconstitute persuasive other evidence. In reaching its conclusions, an inspection teamconsiders whether audit documentation or other evidence that a firm might provide to
the inspection team supports the firm's contention that it performed a procedure,
obtained evidence, or reached an appropriate conclusion. In the case of every mattercited in the public portion of a final inspection report, the inspection team has carefully
considered any contention by the firm that it did so but just did not document its work,and the inspection team has concluded that the available evidence does not support thecontention that the firm sufficiently performed the necessary work.
Identified deficiencies in the audit work that exceed a significance threshold(which is described in Part I.A of the inspection report) are summarized in the public
portion of the inspection report.8
The Board cautions against extrapolating from the results presented in the public
portion of a report to broader conclusions about the frequency of deficiencies
throughout the firm's practice. Individual audits and areas of inspection focus are mostoften selected on a risk-weighted basis and not randomly. Areas of focus vary among
selected audits, but often involve audit work on the most difficult or inherently uncertain
areas of financial statements. Thus, the audit work is generally selected for inspection
based on factors that, in the inspection team's view, heighten the possibility that auditing
deficiencies are present, rather than through a process intended to identify arepresentative sample.
C.2.

Review of a Firm's Quality Control System

QC 20, System of Quality Control for a CPA Firm's Accounting and Auditing
Practice, provides that an auditing firm has a responsibility to ensure that its personnel
comply with the applicable professional standards. This standard specifies that a firm's
system of quality control should encompass the following elements: (1) independence,
8

The discussion in this report of any deficiency observed in a particular
audit reflects information reported to the Board by the inspection team and does notreflect any determination by the Board as to whether the Firm has engaged in any
conduct for which it could be sanctioned through the Board's disciplinary process. In
addition, any references in this report to violations or potential violations of law, rules, or
professional standards are not a result of an adversarial adjudicative process and do
not constitute conclusive findings for purposes of imposing legal liability.

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Page 10integrity, and objectivity; (2) personnel management; (3) acceptance and continuance ofissuer audit engagements; (4) engagement performance; and (5) monitoring.
The inspection team's assessment of a firm's quality control system is derived
both from the results of its procedures specifically focused on the firm's quality control
policies and procedures, and also from inferences that can be drawn from deficiencies
in the performance of individual audits. Audit deficiencies, whether alone or whenaggregated, may indicate areas where a firm's system has failed to provide reasonableassurance of quality in the performance of audits. Even deficiencies that do not result in
an insufficiently supported audit opinion may indicate a defect or potential defect in a
firm's quality control system.9 If identified deficiencies, when accumulated andevaluated, indicate defects or potential defects in the firm's system of quality control, thenonpublic portion of this report would include a discussion of those issues. Whenevaluating whether identified deficiencies in individual audits indicate a defect or
potential defect in a firm's system of quality control, the inspection team considers thenature, significance, and frequency of deficiencies;10 related firm methodology,
guidance, and practices; and possible root causes.
Inspections also include a review of certain of the firm's practices, policies, andprocesses related to audit quality, which constitute a part of the firm's quality control
system. This review addresses practices, policies, and procedures concerning audit
performance, training, compliance with independence standards, client acceptance andretention, and the establishment of policies and procedures.
END OF PART I

9

Not every audit deficiency suggests a defect or potential defect in a firm's
quality control system, and this report may not discuss every audit deficiency theinspection team identified.
10

An evaluation of the frequency of a type of deficiency may include
consideration of how often the inspection team reviewed audit work that presented theopportunity for similar deficiencies to occur. In some cases, even a type of deficiency
that is observed infrequently in a particular inspection may, because of somecombination of its nature, its significance, and the frequency with which it has been
observed in previous inspections of the firm, be cause for concern about a quality
control defect or potential defect.

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Page 11PARTS II AND III OF THIS REPORT ARE NONPUBLIC
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Page 12PART IVRESPONSE OF THE FIRM TO DRAFT INSPECTION REPORT
Pursuant to section 104(f) of the Act, 15 U.S.C. § 7214(f), and PCAOB Rule
4007(a), the Firm provided a written response to a draft of this report and that response
has received careful consideration. Pursuant to section 104(f) of the Act and PCAOB
Rule 4007(b), the Firm's response, minus any portion granted confidential treatment, isattached hereto and made part of this final inspection report.11

11

The Board does not make public any of a firm's comments that address a
nonpublic portion of the report unless a firm specifically requests otherwise. In somecases, the result may be that none of a firm's response is made publicly available. In
addition, pursuant to section 104(f) of the Act, 15 U.S.C. § 7214(f), and PCAOB Rule
4007(b), if a firm requests, and the Board grants, confidential treatment for any of the
firm's comments on a draft report, the Board does not include those comments in the
final report at all. The Board routinely grants confidential treatment, if requested, for any
portion of a firm's response that addresses any point in the draft that the Board omits
from, or any inaccurate statement in the draft that the Board corrects in, the final report.

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APPENDIX A
AUDITING STANDARDS REFERENCED IN PART I
This appendix provides the text of the auditing standard paragraphs that arereferenced in Part I.A of this report. Footnotes that are included in this appendix, andany other Notes, are from the original auditing standards that are referenced. While thisappendix contains the specific portions of the relevant standards cited with respect tothe deficiencies in Part I.A of this report, other portions of the standards (including thosedescribed in Part I.B of this report) may provide additional context, descriptions, related
requirements, or explanations; the complete standards are available on the PCAOB's
website at http://pcaobus.org/STANDARDS/Pages/default.aspx.
AS 1105, Audit Evidence
SUFFICIENTAPPROPRIATE AUDITEVIDENCE
Using Information
Produced by the Company
AS 1105.10

When using information produced by the company
as audit evidence, the auditor should evaluate whether the
information is sufficient and appropriate for purposes of theaudit by performing procedures to:3
 Test the accuracy and completeness of theinformation, or test the controls over the accuracy
and completeness of that information; and Evaluate whether the information is sufficiently
precise and detailed for purposes of the audit.

Issuers A and C

Footnote to AS 1105.10
3

When using the work of a specialist engaged or employed by management, see AS 1210,
Using the Work of a Specialist. When using information produced by a service organization or a service
auditor's report as audit evidence, see AS 2601, Consideration of an Entity's Use of a Service Organization,and for integrated audits, see AS 2201, An Audit of Internal Control Over Financial Reporting That Is Integrated
with An Audit of Financial Statements.

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AS 1210, Using the Work of a Specialist
USING THE FINDINGS OF
THE SPECIALISTAS 1210.12

The appropriateness and reasonableness of
methods and assumptions used and their application are theresponsibility of the specialist. The auditor should (a) obtain
an understanding of the methods and assumptions used by
the specialist, (b) make appropriate tests of data provided tothe specialist, taking into account the auditor's assessment ofcontrol risk, and (c) evaluate whether the specialist's findings
support the related assertions in the financial statements.
Ordinarily, the auditor would use the work of the specialist
unless the auditor's procedures lead him or her to believe thefindings are unreasonable in the circumstances. If the auditor
believes the findings are unreasonable, he or she should
apply additional procedures, which may include obtaining theopinion of another specialist.

Issuer A

AS 2201, An Audit of Internal Control Over Financial Reporting That Is Integrated
with An Audit of Financial Statements
USING A TOP-DOWN
APPROACH
Understanding Likely
Sources of Misstatement
AS 2201.34

To further understand the likely sources of potential
misstatements, and as a part of selecting the controls to test,
the auditor should achieve the following objectives –







Understand the flow of transactions related to therelevant assertions, including how these transactions
are initiated, authorized, processed, and recorded;
Verify that the auditor has identified the points within
the company's processes at which a misstatement including a misstatement due to fraud - could arise
that, individually or in combination with othermisstatements, would be material;
Identify the controls that management has
implemented
toaddressthese
potential
misstatements; andIdentify the controls that management has
implemented over the prevention or timely detectionof unauthorized acquisition, use, or disposition of thecompany's assets that could result in a material
misstatement of the financial statements.

Issuer A

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AS 2201, An Audit of Internal Control Over Financial Reporting That Is Integrated
with An Audit of Financial Statements
Selecting Controls to Test
AS 2201.39

The auditor should test those controls that areimportant to the auditor's conclusion about whether thecompany's controls sufficiently address the assessed risk of
misstatement to each relevant assertion.

Issuers A, B,
and C

The auditor should test the design effectiveness ofcontrols by determining whether the company's controls, if
they are operated as prescribed by persons possessing thenecessary authority and competence to perform the control
effectively, satisfy the company's control objectives and caneffectively prevent or detect errors or fraud that could result inmaterial misstatements in the financial statements.

Issuers A, B,
and C

TESTING CONTROLS
Testing Design
EffectivenessAS 2201.42

Note: A smaller, less complex company might achieve
its control objectives in a different manner from alarger, more complex organization. For example, asmaller, less complex company might have fewer
employees in the accounting function, limiting
opportunities to segregate duties and leading thecompany to implement alternative controls to achieve
its control objectives. In such circumstances, theauditor should evaluate whether those alternative
controls are effective.
Testing Operating
EffectivenessAS 2201.44

The auditor should test the operating effectiveness ofa control by determining whether the control is operating as
designed and whether the person performing the control
possesses the necessary authority and competence toperform the control effectively.
Note: In some situations, particularly in smaller
companies, a company might use a third party toprovide assistance with certain financial reporting
functions. When assessing the competence of
personnel responsible for a company's financial
reporting and associated controls, the auditor may
take into account the combined competence ofIssuers A, B,
and C

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AS 2201, An Audit of Internal Control Over Financial Reporting That Is Integrated
with An Audit of Financial Statements
company personnel and other parties that assist withfunctions related to financial reporting.
Relationship of Risk to the
Evidence to be Obtained
AS 2201.48

When the auditor identifies deviations from thecompany's controls, he or she should determine the effectof the deviations on his or her assessment of the risk
associated with the control being tested and the evidence
to be obtained, as well as on the operating effectiveness ofthe control.

Issuer A

Note: Because effective internal control overfinancial reporting cannot, and does not, provide
absolute assurance of achieving the company's
control objectives, an individual control does notnecessarily have to operate without any deviation to
be considered effective.
EVALUATING IDENTIFIEDDEFICIENCIESAS 2201.68

The auditor should evaluate the effect ofcompensating controls when determining whether a control
deficiency or combination of deficiencies is a material
weakness. To have a mitigating effect, the compensating
control should operate at a level of precision that would
prevent or detect a misstatement that could be material.

Issuers A andB

To obtain evidence about whether a selected control
is effective, the control must be tested directly; theeffectiveness of a control cannot be inferred from the absenceof misstatements detected by substantive procedures. The
absence of misstatements detected by substantive
procedures, however, should inform the auditor's risk
assessments in determining the testing necessary to conclude
on the effectiveness of a control.

Issuer A

APPENDIX B - Special
TopicsINTEGRATION OF AUDITS
AS 2201.B9

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AS 2301, The Auditor's Responses to the Risks of Material MisstatementRESPONSES INVOLVING
THE NATURE, TIMING,
AND EXTENT OF AUDITPROCEDURES
AS 2301.08

The auditor should design and perform audit
procedures in a manner that addresses the assessedrisks of material misstatement for each relevant assertionof each significant account and disclosure.

Issuer A

For significant risks, the auditor should perform
substantive procedures, including tests of details, thatare specifically responsive to the assessed risks.

Issuer A

Responses to Significant
Risks
AS 2301.11

Note: AS 2110 discusses identification ofsignificant risks10 and states that fraud risks are
significant risks.

Footnote to AS 2301.11
10

See AS 2110.71 for factors that the auditor should evaluate in determining which risks are

significant risks.

AS 2305, Substantive Analytical Procedures
ANALYTICALPROCEDURES USED AS
SUBSTANTIVE TESTS
Availability and Reliabilityof Data
AS 2305.16

Before using the results obtained from substantive
analytical procedures, the auditor should either test thedesign and operating effectiveness of controls over financial
information used in the substantive analytical procedures or
perform other procedures to support the completeness andaccuracy of the underlying information. The auditor obtains
assurance from analytical procedures based upon theconsistency of the recorded amounts with expectations
developed from data derived from other sources. The
reliability of the data used to develop the expectations should

Issuer C

PCAOB Release No. 104-2018-159
Inspection of Plante & Moran, PLLC
September 20, 2018
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AS 2305, Substantive Analytical Procedures
be appropriate for the desired level of assurance from theanalytical procedure. The auditor should assess the reliabilityof the data by considering the source of the data and theconditions under which it was gathered, as well as otherknowledge the auditor may have about the data. The
following factors influence the auditor's consideration of thereliability of data for purposes of achieving audit objectives:



Whether the data was obtained from independentsources outside the entity or from sources within theentity

Whether sources within the entity were independentof those who are responsible for the amount being
audited

Whether the data was developed under a reliable
system with adequate controls



Whether the data was subjected to audit testing in
the current or prior yearWhether the expectations were developed using
data from a variety of sources

AS 2501, Auditing Accounting Estimates
EVALUATINGACCOUNTING ESTIMATES
Evaluating
ReasonablenessAS 2501.11

Review and test management's process. In many
situations, the auditor assesses the reasonableness of an
accounting estimate by performing procedures to test theprocess used by management to make the estimate. The
following are procedures the auditor may consider performing
when using this approach:a.

b.

Identify whether there are controls over the
preparation of accounting estimates and supporting
data that may be useful in the evaluation.
Identify the sources of data and factors thatmanagement used in forming the assumptions, andconsider whether such data and factors are relevant,reliable, and sufficient for the purpose based on
information gathered in other audit tests.

Issuer B

PCAOB Release No. 104-2018-159
Inspection of Plante & Moran, PLLC
September 20, 2018
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AS 2501, Auditing Accounting Estimates
c.
d.

e.

f.

g.

h.

i.

Consider whether there are additional key factors oralternative assumptions about the factors.
Evaluate whether the assumptions are consistent
with each other, the supporting data, relevant
historical data, and industry data.
Analyze historical data used in developing theassumptions to assess whether the data iscomparable and consistent with data of the period
under audit, and consider whether such data issufficiently reliable for the purpose.
Consider whether changes in the business orindustry may cause other factors to become
significant to the assumptions.
Review available documentation of the assumptions
used in developing the accounting estimates andinquire about any other plans, goals, and objectivesof the entity, as well as consider their relationship tothe assumptions.
Consider using the work of a specialist regarding
certain assumptions (AS 1210, Using the Work of aSpecialist).
Test the calculations used by management totranslate the assumptions and key factors into theaccounting estimate.

AS 2605, Consideration of the Internal Audit Function
EVALUATING ANDTESTING THE
EFFECTIVENESS OF
INTERNAL AUDITORS'WORKAS 2605.24

The auditor should perform procedures to evaluate
the quality and effectiveness of the internal auditors' work,
as described in paragraphs .12 through .17, thatsignificantly affects the nature, timing, and extent of theauditor's procedures. The nature and extent of theprocedures the auditor should perform when making thisevaluation are a matter of judgment depending on theextent of the effect of the internal auditors' work on theauditor's procedures for significant account balances orclasses of transactions.

Issuer C

PCAOB Release No. 104-2018-159
Inspection of Plante & Moran, PLLC
September 20, 2018
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AS 2605, Consideration of the Internal Audit Function
AS 2605.25

In developing the evaluation procedures, the auditor
should consider such factors as whether the internal
auditors'—
 Scope of work is appropriate to meet the objectives.
 Audit programs are adequate.
 Working papers adequately document work
performed, including evidence of supervision andreview.
 Conclusions are appropriate in the circumstances.
 Reports are consistent with the results of the work
performed.

Issuer C