New PwC assurance leader works to improve audits
November 20, 2024
PricewaterhouseCoopers has been focusing on auditing under a new PwC US assurance leader, Deanna Byrne, who began the job in July.
Byrne is in her 36th year with PwC, starting as an intern. "I have been in the assurance practice my entire career, although I've had a number of different roles in different industry groups and leadership positions," she told Accounting Today. "I feel like I've had nine jobs with one organization, which has been fantastic."
Byrne is based in PwC's Philadelphia office. Prior to taking on her new role she was the Philadelphia office managing partner and led the East region within PwC's consumer and industrial products group.
"I've had a number of different responsibilities leading up to this tremendous opportunity, and I am absolutely thrilled to be able to step onto the leadership team as the assurance leader," she said. "I'm really proud of PwC's positioning in the industry, from a quality perspective. Quality is job one, and what I think about every day."
In her current role, she is focusing on expanding PwC's assurance offerings into areas like AI and sustainability. "There continue to be more needs outside of the financial statement audit for auditors, which I think is just great for the profession," said Byrne.
The New York-based firm reorganized earlier this year under its new senior partner, Paul Griggs, who realigned its organizational structure across three lines of service: Assurance, Tax and Advisory. The shift occurred only about three years after PwC restructured into two sides: Trust Solutions and Consulting Solutions.
"With Paul coming in as the new senior partner, we are now one single assurance line of service again, which I think is fantastic," said Byrne. "It really is the way that we were structured for a number of years. We're very accustomed to operating in this line, and we're still working very closely with our tax and consulting colleagues. But we're very comfortable with this structure. It allows us to go to market by sector. That's primarily how we interact with our clients at the sector level, either insurance, banking or asset wealth management on the financial services side of the house, or consumer products, tech, as well as health industries and others on the products and services side."
Overall, there are nine different industry sectors targeted by the current structure. "This structure allows us to really focus on having all of the assurance personnel together and driving our learning and development, our technology, which is all focused on ensuring continued audit quality, and how we continue to advance efficiencies and allow audits to become more efficient, less burdensome to our clients," said Byrne. "We're always trying to deliver more enhanced feedback to them on things that we're seeing across the portfolios of those clients."
PwC recently released its annual audit quality report showing how the firm is improving its audits.
"We're really proud of that document," said Byrne. "It underpins how we think about quality, and we want to be transparent with the marketplace on how we're doing."
The Public Company Accounting Oversight Board has been finding problems with the audits of some of the largest firms. During its inspections last year, the PCAOB saw some improvements, but audit deficiency rates still appear to be high, with an average of 46% of the engagements reviewed in 2023 having at least one deficiency significant enough to be included in Part I.A of the inspection report, excluding broker-dealer audit inspections, according to a staff spotlight publication released in August. PwC had an 18% rate, which compared well with the rest of the Big Four.
"I'm very proud of our profession-leading results as it relates to our compliance with our regulator," said Byrne. "But at the same time, I think that's one indicator of quality, and the audit quality report really gives a lot of broader data and information on how we're thinking about quality. While we recognize and are proud of where we are, we also know that we can always do better. Continuous improvement has always been a core tenet at PwC, and that is one that I'm very focused on. We're really looking at it as a result of the feedback we've gotten, not only from our external inspections, but also our internal inspections that we do ourselves."
PwC has been improving its training in response to the findings. "We're continuing to embed additional training and skills around new supervision and review," said Byrne. "That was something coming out of our cycle we really wanted to try and enhance, so we enhanced some of our policies and rolled out some more training there. We believe what the regulator does is very important and we respect that. We want to make sure that we're continuing to do everything we can do to have the best results possible."
The PCAOB findings of audit deficiencies across so many large firms point to the need for improvements, even if the number of financial restatements isn't as high. "I think there are a number of dimensions to think about," said Byrne. "When you think about audit quality, obviously external inspections from the PCAOB are an important one, and we look at that as relative to how we're doing and how we want to make changes to advance quality."
PwC's audit quality report found that 97% of the firm's audit professionals reported that they receive consistent messages about the importance of audit quality from leadership.
"If you read the audit quality report, you can see a number of initiatives that we have to drive not just quality within the firm, but as we're thinking about the profession, ways that we can continue to support advancing the profession," said Byrne.
"When we think about what we're delivering in the audit quality report, it's not just the inspection findings and that type of thing, but it's also how we are trying to continue to lead the profession in areas that will help benefit the entire profession," she added.
With the Trump administration coming into the White House in January along with a new Republican-dominated Senate, there's talk about the federal government placing less emphasis on regulation at the Securities and Exchange Commission and perhaps the PCAOB.
"From my perspective, quality is bipartisan, so we're going to continue to do what we think is right to ensure that we're delivering a high-quality audit, and we'll make sure that we're following the regulations that are in place," said Byrne.
Attracting young people
Accounting firms like PwC have been facing hurdles in attracting more young people to enter the profession, especially when it comes to jobs like auditing.
"I'd love to say that the challenge doesn't exist, because I believe it's such a fantastic profession," said Byrne. "But the numbers don't lie. The number of students choosing accounting in the recent past has clearly declined, and in an effort to really combat that, what we want to be responsible for is being a voice to say, let us talk to you a little bit more about what the accounting profession can provide to you. Not everyone needs to continue to be a lifer at PwC, such as myself. It really does provide the language of business, and we look at our alumni that have moved on to be very successful in lots of different avenues within business and even outside of business, and they would tell you that the experience that they learned, and the value of the accounting degree, really helped them as they were moving on throughout their career."
PwC has invested 140,000 hours in talking about the profession at high schools and college campuses to try to attract talented young people to join the profession.
"We're committing a lot of hours to go to high schools and junior colleges to talk about the value of the profession, and what great opportunities are out there," said Byrne.
The firm will be hosting Destination CPA, a three-day training event in March in Orlando to encourage students to better understand the value of an accounting degree and what that can provide from an ongoing career perspective. In that program, PwC focuses on sophomores and juniors who have yet to commit to a five-year CPA program, demonstrating to them the value of the profession.
Byrne sees value in making the traditional 150-hour requirement more flexible for CPA candidates. "We are very supportive of alternatives to be able to to become a CPA," she said. "Our biggest priority is really to ensure that mobility across the states is maintained. That's really critical. We're supportive of a lot of the different avenues that are being promoted right now to potentially get there. Anything we can do to open up the aperture for more students who want to come into the profession is really a good thing."
Despite the need for more young people in the profession, PwC recently laid off 1,800 employees in the U.S. However, the audit quality report says the firm hired over 1,800 entry-level and over 50 experienced audit professionals, and total headcount increased to over 16,000 audit team members.
AI growth
Meanwhile, PwC has been ramping up its use of technology such as artificial intelligence and data analytics to automate its processes.
"It's a huge focus for us in a few ways," said Byrne. "We have a lot of components of our learning and development plan to upskill our people so that they become better digital citizens and can really implement new technology in the work that we're doing for our clients."
That means embedding next-generation technology into PwC's audit platform. "We're spending a lot of time and resources in that space," said Byrne. "I'm really proud of our progress there, but there's still a way to go. But then also in offerings that we're providing to our clients, how do we help them with responsible AI to ensure that they have the right governance structure, and how can we help support in those areas? We're really seeing it on both sides, and it will continue to be one of our top priorities as we move into the next few years."
PwC has been working with OpenAI and Microsoft on employing generative AI technology at the firm. "We still are working with them as we're continuing to build out our next-generation audit," said Byrne. "That will really transform the way that we do audits. That's in process. We're taking portions of that along the way and embedding it into our current process now and really seeing some benefits."
PwC recently announced a $1.5 million investment to fund the launch of the PwC AI in Accounting Fellowship in Bryant University, in Smithfield, Rhode Island.
PwC US has also been outsourcing some of its work abroad to other member firms in its global network. "We started probably greater than five years ago with acceleration centers overseas in various locations, and have continued to move portions of our work into those centers," said Byrne. "We've also set up Centers of Excellence onshore in the U.S., where some of the more routine work areas will be performed in a Center of Excellence, as opposed to on the engagement team. That's coordinated through the engagement team, but it may be done slightly differently. That model has continued to evolve over the years, and we'll continue to look at what makes the most sense from the overall engagement perspective."
Sustainability assurance
Meanwhile, PwC is seeing more demand for sustainability assurance services, especially in the European Union, where the Corporate Sustainability Reporting Directive will be taking effect for large companies. "Because the European regulations are now out and are becoming applicable for multinational clients, we are working with a number of our clients as they begin to assess their readiness for these standards," said Byrne. "It depends on the size, but some of them will be required to have limited assurance or reasonable assurance over the next few years. We've continued to upscale our people so that they're prepared and can really help our clients as they enter into this new era of reporting that they're not familiar with. There are also some states in the U.S. that will potentially have new reporting for that as well, so we're continuing to get our people ready for that, get our methodology and technology aligned, and be able to deliver that in the next year."
California, for example, has passed a law requiring companies that earn over $1 billion per year to report on their emissions and disclose their climate-related financial risks starting in 2026.
Over the next few years, Byrne expects to see more technology advances in the audit profession. "We're working really hard there to make sure that we have the right balance of technology," she said. "But we're people led, and we're continuing to ensure that judgments are made by our people, so we need to continue to recruit and retain the right amount of people. And also as sustainability and AI and other areas emerge where we believe that the market's looking to us to continue to provide assurance in these areas, we're going to continue to upskill and be prepared to deliver whatever the market ultimately requires or wants from a reporting perspective."
[Accounting Today]
