The US Public Company Accounting Oversight Board (PCAOB) said Ernst & Young US (E&Y) did not address some of its quality control concerns issued in the July 2010 inspection report.
The PCAOB said it takes "very seriously the importance of firms making sufficient progress on quality control issues identified in an inspection report in the 12 months following the report".
"Particularly with the largest firms, which are inspected annually, the PCAOB devotes considerable time and resources to critically evaluating whether the firm did in fact make sufficient progress in that period," the watchdog said.
In the initial inspection report PCAOB flagged problems in E&Y’s evaluation of the accuracy of clients’ estimates of asset impairment and the size of reserves companies took against issues like environmental problems and expired inventory.
Additionally, concerns over the supervision of auditors and professional scepticism were raised.
The PCAOB said that E&Y won’t seek a review by the Securities and Exchange Commission of the findings.
A statement from the firm said it believed it took "significant remedial actions" in response to the PCAOB’s concerns by enhancing resources, policies and practices.
"In each of the areas noted, we have provided our audit professionals with new audit tools, additional training and expanded technical guidance," E&Y said in a statement.