The Public Company Accounting Oversight Board (PCAOB) is the main “watchdog” of the US auditing profession. As part of their quality review procedures they look at samples of audits undertaken.
They have just released their findings for their inspections on the work of KPMG and pwc in the US.
The results of their inspections may surprise some of you as they identified a pretty high number of deficiencies in the work undertaken.
The deficiencies identified were more than the occasional one or two.
In the report on audits performed by pwc for example, the PCAOB found significant deficiencies in 21 of the 52 pwc audits it inspected. That’s just over 40% of the audits sampled.
They inspected 48 audits undertaken by KPMG and found deficiencies in 17 of them (35%).
The PCAOB says that in many of the situations the firms had failed to obtain appropriate audit evidence to support their audit opinions.
For example, during one audit review they found that pwc hadn’t tested the valuation of some financial instruments sufficiently. These financial instruments represented a significant proportion of the company’s portfolio.
If you’re interested in reading the full reports they can be found here:
The PCAOB did point out that that their inspections took place throughout 2012, so the fact that a deficiency was included in the reports didn’t necessarily mean that it remained unaddressed by KPMG or pwc.