From: Kobi Israeli, CPA (MBA), Audit and Quality Control Review Partner at Barlazai & Co. Responsible for the quality management system of audit services and providing professional support to audit teams at the firm's audited companies in accordance with PCAOB rules.
In an era where accounting standards are becoming increasingly complex, financial regulations are tightening, and the business environment is becoming ever more competitive, choosing the right auditor for financial statements is crucial. A crucial detail that many overlook is selecting a firm that operates with the highest quality control standards for all types of engagements and implements a detailed, procedure-backed quality policy. This policy ensures accurate, professional, and reliable service that provides you with the complete picture.
A prominent example of such a firm is Barzilai & Co. Certified Public Accountants, which in recent years has positioned itself at the forefront of quality among leading accounting firms and has begun providing audit services to American public companies audited according to PCAOB rules. This strategic move was accompanied by strengthening the internal quality control system and updating the firm's work procedures, monitoring and tracking methods, training, and the implementation of new auditing software.
Barzilai & Co. Certified Public Accountants has approximately 180 employees and 16 partners, operating from two branches in Tel Aviv and Jerusalem. The firm is structured into professional departments covering audit, taxation, accounting and regulatory consulting, and business advisory. The firm is a member of the international network MSI Global Alliance, enabling its clients to receive cross-border professional support and access to international expertise while maintaining principles of professional independence and high professional standards.
In May 2025, the firm received the findings of an audit conducted by the PCAOB in December 2024. Approximately two months later, in July, the PCAOB issued its position, accepting the firm's remediation process following the findings from the previous 2021 report. The 2024 audit findings, which revealed no material deficiencies, are official evidence of a deep methodological improvement. This improvement was achieved through focused, stringent, and uncompromising professional leadership, with the full cooperation of all firm teams.
What is the PCAOB and what is its importance?
Following the Enron and similar events and the crises of confidence created in the US capital market, the Sarbanes-Oxley Act was enacted in the US in July 2002. This act applies to companies whose securities are registered for public trading in the US or are required to file reports in accordance with US securities laws. One of its main objectives, the Sarbanes-Oxley Act is designed to improve the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with relevant financial reporting rules. The first section of the act discusses the establishment of the PCAOB as an independent oversight body that supervises audits of public companies, with the aim of protecting the investing public and ensuring that the audit process of public companies" financial statements is conducted at the highest quality. The PCAOB operates in four main areas: registration of accounting firms that audit public companies in the US, conducting periodic quality control inspections of registered firms, disciplinary enforcement against accountants and firms that deviate from standards, and publication of mandatory professional auditing and control standards.
Who is audited under PCAOB rules?
PCAOB audits are required for any company whose shares are traded on U.S. stock exchanges, including Israeli companies traded there and subsidiaries of American corporations. Consequently, Israeli accounting firms auditing such companies are also subject to the close supervision of the U.S. authority.
The advantage of an audit according to PCAOB standards
For companies, a PCAOB audit provides credibility and resilience with international investors, as well as a ticket for direct access to the world's major financial markets. For the audit firm, it is a set of rules and procedures that require an exceptionally high professional standard but also establish the firm's image as a reliable, transparent, and meticulous entity.
How does PCAOB quality control work?
The PCAOB conducts in-depth audits of accounting firms worldwide. The report includes findings divided into two parts:
Part one, divided into three sub-parts:
- Part A: Findings relating to the accountant's professional judgment or a material audit failure that affected their opinion as auditor.
- Part B: General Findings in the Application of PCAOB Auditing Standards.
- Part C: Findings Related to Auditor Independence.
Part Two
The section referring to findings from the reviewed office's quality control system. This section will remain confidential to the public for a period of 12 months from the final report's publication, until the reviewed office rectifies the findings as part of the Remediation process.
Barzilai & Co. Success Story'
Following the 2021 audit, Barzilai & Co. initiated a comprehensive remediation process that included a re-examination of quality control systems, audit procedures, updating working papers, and in-depth training for audit teams. The professional leadership of this process, spearheaded by CPA Kobi Israeli along with the firm's partners and employees, led to a cultural and systemic change within the firm. At the end of the process, it was ratified by an external consultant to the firm who recommended to the PCAOB that the firm had successfully completed the process.
The investment in quality and a new professional culture has borne fruit: the latest 2024 report did not include comments in Section A, and the firm received a positive assessment from the PCAOB regarding the exceptional level of compliance and quality of its quality control system. This is an unprecedented achievement for a medium-sized Israeli firm. Avoiding comments in Section A is not just a technical achievement; it is an expression of the highest level of professionalism, excellence, and a culture of critical judgment. The absence of comments in Section A is clear evidence that all audited works met the highest professional standard.
Barazli & Co. Quality Policy and A Look to the Future
The quality policy of Barzilay & Co. is based on principles of feedback in audit work, maximum reduction of deficiencies during work, continuous improvement of processes, and customization of service to client needs. Today, the firm implements quality control standards QC20, QC30, and QC40, which provide the professional framework for ensuring work quality:
- QC20 focuses on the management of a quality control system regarding audit activities, and describes the quality control components and other issues related to the effective design, implementation, and maintenance of the quality control system.
- QC30 focuses on quality control in specific audit works, with an emphasis on monitoring during the work, independence of the quality approval auditor, adherence to professional ethics, and complete documentation.
- QC40 focuses on the entire office, emphasizing comprehensive activity monitoring, independent supervision of audit teams, and strengthening ethical culture.
In December 2026, standard QC1000 is expected to come into effect, replacing the three existing quality control standards. The new standard is more stringent and requires a comprehensive, ongoing, and organized system for all internal supervision processes, strict enforcement of independence, and adherence to ethical rules.
The importance of adhering to quality control rules
Quality control is not just a regulatory requirement; it is an expression of ethics, public responsibility, and professionalism. In a world where investor confidence is a paramount asset, strict adherence to PCAOB rules is key to maintaining the stability of the financial system. Investing in quality control is a long-term investment in trust, transparency, and stability.
