The US profession has welcomed the Public Company Accounting
Oversight Board’s (PCAOB) report reviewing the first four years of
inspections of the nation’s eight largest audit firms.

Public policy organisation the Center for Audit Quality, which
acts as a voice for the audit profession, said the board’s
independent inspections provide valuable assurance to investors
that areas where auditors can improve have been identified and
appropriate actions are being taken.

The report summarises deficiencies identified in audits by BDO
Seidman, Crowe Horwath, Deloitte, Ernst & Young, Grant
Thornton, KPMG, McGladrey & Pullen and PricewaterhouseCoopers.
It does not identify any shortcomings specific to the individual
firms.

The most common audit deficiencies related to revenues,
accounting estimates, auditing fair value measurement, analytical
procedures, income taxes, internal control, audit sampling, use of
specialists, materiality, audit scope and audit differences.

The board noted that in some cases the deficiencies appeared to
have been caused by a failure to apply an appropriate level of
professional scepticism when conducting audit procedures and
evaluating audit results.

Inspectors found improvement in most areas where deficiencies
had been identified.

Deficiencies declined in some well-established audit areas,
including confirmation of accounts receivable and the audit of
income tax accounts. Where quality control deficiencies had been
identified, firms subsequently changed audit methodologies,
processes or related quality control systems.

The most common GAAP departures related to income taxes,
derivatives, revenues and cash flow presentations.