New PCAOB report reviews SPAC-related audits

By Kevin Brewer

A new PCAOB staff report analyzes audits of special-purpose acquisition companies (SPACs), an area in which its inspectors have observed relatively high rates of audit deficiencies.

The report offers a view into inspection observations and staff insights to investors and other stakeholders.

"From 2020 to 2021, the U.S. markets experienced an unprecedented surge in the number of initial public offerings by SPACs," the PCAOB report said. "SPACs typically have no commercial operations and are public companies formed solely to raise capital to merge with or acquire a private company, effectively taking it public."

Earlier this week, PCAOB inspectors included SPACs among their list of priorities for 2023 inspections.

From 2021 to 2022, PCAOB inspectors reviewed more than 100 audits of companies that were either considered SPACs or that were formed through a de-SPAC transaction. As detailed in the report:

  • The PCAOB reviewed 44 SPAC-related audits performed in 2021. Of those audits, 61% had at least one deficiency.
  • The PCAOB reviewed 71 SPAC-related audits performed in 2022. Of those audits, 37% had at least one deficiency.

Based on these inspections, the report presents several key takeaways for auditors:

  • Exercise due professional care and professional skepticism;
  • Consider whether presentation and disclosures in the financial statements conform with GAAP;
  • Communicate with the public company's audit committee about any significant changes to the fraud or other significant risks initially identified in the planned audit strategy and the reasons for such changes;
  • Understand the public company's processes to develop its accounting estimates;
  • Remain alert to changes in the public company's or the auditor's circumstances that may give rise to situations that could impair auditor independence;
  • Consider the nature of the public company, the risks of material misstatement, and each audit engagement team member's knowledge, skill, and ability when assigning work to engagement team members and determining the necessary extent of supervision; and
  • Identify and assess the risks of material misstatement due to error or fraud throughout the audit. New challenges may arise, and auditors have a responsibility to adjust their audits to respond to new or evolving risks of material misstatement, including the competence of the personnel who perform the control or monitor its performance.

— To comment on this article or to suggest an idea for another article, contact Kevin Brewer at

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