PCAOB unveils inspection reports of large companies
The Public Company Accounting Oversight Board on Tuesday released its annual inspection reports for the big four companies, along with eight other companies inspected each year.
For PricewaterhouseCoopers, 18 of the 60 audits inspected in 2019 were included in a section of the report that highlights significant deficiencies. For KPMG, 17 of the 58 audits were included in this section, part 1.A, due to the importance of the deficiencies identified. For Ernst and Young, 11 of the 60 audits were included, and for Deloitte & Touche, six of the 58 audits reviewed were included.
The PCAOB typically publishes its inspection reports for the Big Four companies on different days, and it is unusual for them to publish them with some of their smaller competitors on the same day when they can be more easily compared. The PCAOB has also revised the format of its reports to make them easier to read.
Other large companies whose inspection results have been posted include BDO United States, which had 11 of its 26 checks included in Part 1.A; Grant Thornton, which highlighted seven of its 31 audits; RSM, of which three of the 15 audits inspected were included in this section; and Crowe, which had seven of the 14 audits inspected included in Part 1.A.
In the case of PwC, the weaknesses identified for 2019 mainly concerned the tests performed by the company on controls and / or substantive testing of income and related accounts, income taxes, allowance for loan losses, investment securities and stocks. However, a PwC official recently said Accounting today that the firm had improved its performance in its last PCAOB report for 2020, and expects that only one of the 52 missions subject to inspection will be included in Part 1.A of the report (see the story).
“I’m delighted with the progress we’ve made, but I also know that the progress is not over,” said Wes Bricker, US Insurance Manager at PwC. “Quality was our first priority. This is reflected in the results. We have made significant progress in improving our inspection results. With the PCAOB inspection cycle recently completed, and our own internal inspection cycle also completed, I’m really pleased with the progress we’ve made. Only one of the 52 missions that were inspected is included in Part 1.A, which reflects a number of steps we are taking to improve our insurance work. We have seen a lot more consistency and execution across our portfolio. It really reflects the positive investments we have made and the leadership of our employees.
For KPMG, the PCAOB said the deficiencies identified were mainly related to the tests performed by the company on the controls and / or the substantive testing of the revenues and associated accounts and business combinations. “We recognize the importance that capital markets place on high quality audits and consistent execution at this level is our highest priority,” KPMG said in response to the report. “To this end, we remain dedicated to continuously improving the performance of our audit engagements and our audit quality control system. The specific actions we have taken and continue to take to achieve these improvements are discussed in our 2020 Audit Quality Report as we seek to provide transparency to our stakeholders on our overall efforts to improve performance. audit quality.
For EY, the shortcomings mainly concerned the tests performed by the company on controls and / or substantive testing of income and associated accounts, business combinations and long-lived assets. “Carrying out high quality audits with independence, integrity and critical thinking is at the heart of our responsibilities as auditors,” EY said in response to the report. “While we currently face significant uncertainties in our world of work and in society at large, our commitment to audit quality remains steadfast. “
For Deloitte, the shortcomings mainly concerned the tests performed by the firm on controls and / or substantive testing of inventories and related revenues and accounts. “Performing high-quality audits is our number one priority,” wrote Joseph Ucuzoglu, CEO of Deloitte, and Lara Abrash, President and CEO of Deloitte & Touche, in response to the report. “To continuously improve quality, we are transforming auditing to take advantage of innovative technologies, while upgrading the skills of our talent to prepare them for a digitally driven future. We believe that our ongoing digital transformation, as well as the investments we continue to make in our audit processes, policies and quality controls, translate into significant improvements in the quality of our audit.
For BDO, the shortcomings identified by the PCAOB inspectors mainly concerned the tests carried out by the firm on the controls and / or validation tests of income and the related accounts and income taxes. “We remain committed to making audit quality our top priority,” the firm said. “The PCAOB inspection process helps us improve our audit performance and underlying quality control systems. We look forward to continuing to work with the PCAOB on the most effective ways to achieve this goal. “
For Grant Thornton, the deficiencies were primarily in the tests performed by the company on controls and / or substantive testing of revenues and related accounts, inventories, goodwill and intangible assets. “Quality is our top priority and is the foundation of everything we do at Grant Thornton,” said Bradley Preber, CEO of Grant Thornton and Jeffrey Burgess, National Managing Partner of Audit Services. “We are committed to finding new ways to advance audit quality, including through the creation in 2019 of our Audit Quality Advisory Council. The Quality Council, which includes two external members, advises our Partnership Council and management team on the quality of our audits, and provides in-depth, practical and objective advice on how we can continue to deliver high quality. .
For RSM, the deficiencies were mainly related to the tests performed by the company on the controls and / or the corroboration tests of the allowance for loan losses. “We support the PCAOB inspection process and believe it helps us improve the quality of our audit engagements,” wrote RSM US Managing Partner and CEO Joseph Adams and National Audit Executive Joel Shamon. “RSM US LLP is committed to using inspection comments and observations to improve our quality control system. We have a long history of audit quality based on our commitment to integrity, objectivity and excellence.
For Crowe, the deficiencies mainly concerned the tests performed by the company on controls and / or substantive testing of business combinations, allowance for loan losses and investment securities. “Crowe LLP is committed to performing high quality audits, and we have designed our quality control and monitoring systems to drive continuous improvement,” the firm said. “We look forward to continuing the dialogue with the PCAOB to advance the common goal of audit quality. “