Regulators still are finding a high level of
serious deficiencies in the work of major audit firms, continuing a
trend begun last year, a member of the U.S.'s audit-industry oversight
panel said.
Most of
the Public Company Accounting Oversight Board's 2011 inspection reports
of the biggest firms have yet to be issued, but they will show a
continued "spike" in audits found to have serious problems, PCAOB member
Jeanette Franzel said in a speech in Chicago on Thursday.
In some cases, Ms. Franzel said, the board's
inspectors found that auditors gave their clients a clean bill of
health even though the audit work wasn't completely or properly
conducted, or the company's financial statements were contradicted by
other evidence.
Last year, in reports issued on 2010
inspections, "we saw a high level of serious inspection findings, an
increase over previous years," and that trend remains in the 2011
reports, Ms. Franzel said. In the reports issued last year, the board
found deficiencies in nearly a third of the audits they examined at the
Big Four accounting firms—PricewaterhouseCoopers LLP, Deloitte &
Touche LLP, Ernst & Young LLP and KPMG LLP.
The PCAOB conducts annual inspections of the
biggest firms, scrutinizing a sample of their audits. The inspections
focus on audits that the board believes are at highest risk for
problems, so the PCAOB says the results may not reflect how frequently a
firm's overall audit work is deficient. The inspections are intended
only to evaluate a firm's performance and point out areas for
improvement, so offending firms aren't subject to penalties.
PCAOB findings of problems are "to be taken
seriously and firms will continue to work on areas that need to be
improved," said Cindy Fornelli, executive director of the accounting
industry's Center for Audit Quality.
The
only Big Four firm with a 2011 report issued thus far is KPMG, in which
the PCAOB found deficiencies in 12 out of the 52 audits they examined
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