Big Four fail in one in five audits
The world’s four biggest accounting firms have been exposed for botching at least 20% of their audits following an inspection by the Public Company Accounting Oversight Board (PCAOB).
In the most recent annual inspections of the Big Four, inspectors discovered Deloitte botched 20% of audits examined, PricewaterhouseCoopers were substandard in 23.6% of cases, Ernst in 27.3%, and KPMG was found inadequate in half of all cases examined.
According to a recent investigation published by the Project on Government Oversight (POGO), inspectors at the PCAOB found many of the sample audits performed by the US arms of the Big Four were so bad, the accounting firms had no business issuing opinions based on those audits.
However, according to POGO, these alleged violations rarely lead to the oversight board imposing any penalties, with only 18 enforcement cases being sanctioned against the Big Four since the PCAOB was established 17 years ago.
According to the PCAOB, when inspections find an audit was inadequate it does not necessarily mean the audit firm overlooked any problems at the company. For example, it does not mean the company reported erroneous financial results or engaged in accounting fraud, but rather such problems could have gone undetected.
In response to inquiries from POGO, three of the US Big Four offered no comment on their inspection results.
The fourth, Deloitte, stated: “Deloitte is proud of the high quality audits we perform in service to the capital markets, and we continuously look for ways to improve and enhance the quality and value of our work.
“Our continued positive trajectory of regulatory inspection results reflects the large investments we are making to leverage innovative technologies and enhance the skillsets of our talent to prepare them for a digitally driven future.”
Though KPMG declined to comment, it sent POGO a report it issued in January 2019 describing how it has been aiming to do better – including, “embarking on our journey to enhanced audit quality.”
“We are seeing progress as a result of the changes we have made and expect our PCAOB inspection findings to show improvement for the 2018 inspection year,” KPMG said in the report. “We recognise, however, that there is still progress to be made in our audit quality efforts and that our quality efforts will require constant vigilance.”Last Updated: 13 September 2019