After two years of publishing ugly inspection reports for the largest audit firms, at least one member of the Public Company Accounting Oversight Board is expecting to see big improvements in 2013.

Firms that have seen heavy criticism from the PCAOB the past two years are taking seriously their responsibilities to correct audit problems and make improvements in quality control, said PCAOB member Jeanette Franzel in a recent speech to the American Accounting Association. Based on the timing of those two years of inspection findings and the efforts the firms have made, “it is reasonable to expect that firms would achieve significant improvements in their PCAOB inspection results for the audits of the 2012 financial statements,” she said, according to her prepared text. Those inspections will take place in 2013, getting under way as firms finalize those audits.

There's a long lag from the time an audit is performed until an inspection report on that audit is published, creating a significant delay in the feedback loop that could lead to improvement. The public got its first view of trouble in audit quality among the leading audit firms when the PCAOB began publishing 2010 inspection results. Those results covered inspections of 2009 audits, and were published primarily in 2011. The next cycle of audits -- those performed in 2010, then inspected in 2011, and reported in 2012 -- showed no improvement and in some cases even worse results. Franzel said she also is hopeful the next round of inspection reports -- those to be published in 2013, covering 2012 inspections of 2011 financial statements -- will show some improvement.

Acknowledging the long lead time to inspection results, Franzel said the board made a big push in 2011 and 2012 to clear out a backlog of unpublished reports. At the same time, the board is reviewing the processes it uses to issue reports to determine how to improve timeliness. “In addition, we plan to conduct a thorough review of the content and readability of our inspection reports,” she said, looking for ways to make the reports more useful.

In a separate but related initiative, Franzel said the board is also working on identifying indicators of audit quality to help focus the profession on what it can do to pursue higher quality audit work. She notes decades of academic research has yet to reveal any consensus about how to define or measure audit quality, so she is hopeful the PCAOB's efforts can lead to more focus on how to pursue audit quality. The board has set the identification of audit quality indicators as a priority in 2013, she said. “A longer term goal is to track such measures for domestic global network firms and report on those measures over time, she said.