Auditor resource: Considerations for commercial real estate

In light of heightened risk in the commercial real estate (CRE) space, a new PCAOB staff report highlights considerations for auditors.

While the report was written with PCAOB-registered firms in mind, all auditors may find the information helpful.

In Auditing Considerations Related to Commercial Real Estate, the PCAOB staff poses 22 questions for auditors to ask related to CRE audits, starting with a reminder to exercise professional skepticism with potential problem areas such as how higher interest rates and lower occupancy rates can affect a borrower’s ability to make repayments.

The report offers guidance for CRE-related audits in several areas:

• Identifying and assessing risks, including fraud;

• Asset impairment and allowance for credit losses;

• Going concern; and

• Considerations specific to interim reviews.

The CRE-specific report is part of the PCAOB’s staff spotlight series to educate auditors, audit committees, investors, and preparers on the board’s activity.

The PCAOB recently announced plans for board members to host educational forums around the country tailored to PCAOB-registered firms that audit smaller public companies or broker-dealers, beginning with Erica Williams, the PCAOB chair, in Chicago on May 22. Board member George Botic will host a forum on June 5 in Los Angeles, with board members Kara Stein (Denver), Christina Ho (Miami), and Anthony Thompson (Jersey City) to follow later in the year.

— To comment on this article or to suggest an idea for another article, contact Bryan Strickland at Bryan.Strickland@aicpa-cima.com.