Audit Regulator Finds 28 Deficient Audits By KPMG in Annual Report 

PCAOB says Big Four firm’s deficiency rate of 54% is up from 46% a year ago

Audit regulators found 28 deficient audits at KPMG LLP in its latest annual inspection of the Big Four accounting firm, an increase from the level of problems found a year ago.

The 28 deficient audits were out of 52 KPMG audits and partial audits reviewed by the Public Company Accounting Oversight Board in its annual inspection report issued Tuesday, for a deficiency rate of 54%. That is up from a year ago, when PCAOB inspectors found 23 deficient audits out of 50 reviewed, for a rate of 46%.

A deficient audit, under the PCAOB’s definition, means the audit firm hasn’t obtained enough evidence to support its opinions that bless a company’s financial statements and internal controls. It doesn’t mean the company’s financial statements are inaccurate or that the problems found with the audit haven’t since been addressed.

In a statement, KPMG said it has “taken robust steps” to improve audit quality, leading to “significant improvements which will be reflected in future inspection reports.”

KPMG is the last of the Big Four firms to have its inspection reports released for the latest year. Together, the Big Four—KPMG, PricewaterhouseCoopers LLP, Ernst & Young LLP and Deloitte & Touche LLP—had a deficiency rate of 35% for the latest year’s inspections, an improvement over a 39% deficiency rate the previous year.

The PCAOB didn’t identify the companies involved in each deficient audit, in accordance with its usual practice.

The PCAOB inspects a sample of audits each year at each of the major accounting firms, to evaluate their performance and their compliance with professional standards. The board focuses on audits it believes are at highest risk for problems, and so the PCAOB says its inspection results may not reflect how often a firm’s overall audit work is deficient. The inspections are aimed at helping the firms improve their work and don’t lead to any penalties.

Source: WSJ – Audit Regulator Finds 28 Deficient Audits By KPMG in Annual Report

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