The PCAOB, the audit industry regulator, shamed
global audit firm Deloitte recently when they exposed the private portion
of the inspection report of the firm's 2006 audits. It was the first time that
had happened to one the Big Four audit firms, the largest firms that audit the
vast majority of publicly listed firms in and out of the U.S..
I'm sure Deloitte, and the rest of the Big Four, thought
the PCAOB would never have the nerve.
re: The Auditors has seen a
confidential, internal Deloitte training document, prepared this past summer,
that reveals the firm expects the worst when the inspection reports for their
2009, 2010, and 2011 audits are published by the PCAOB. The 2009 report should
be out by the end of this year. The training document also shows how difficult
it is for Deloitte leadership to steer the largest global firm away from the "audit
It seems audit competence and capacity to audit complex
topics are in short supply at all the firms, based on PCAOB inspection results for audits conducted during the financial crisis period
and the reports for 2010 audits at PwC and KPMG released recently. Deloitte has
been particularly hard pressed to maintain audit quality since the firm lost
several engagements that would have helped to grow specialized knowledge and
retain experts. Big clients like Merrill Lynch, Bear Stearns, and Washington
Mutual helped pay the bills for subject matter experts and quality control but
those revenues were lost to financial crisis failures and forced combinations
with better capitalized, non-audit client banks.
I think the PCAOB decided to publicly criticize Deloitte
for two reasons.
We know how that story ended.
Read this article in its entirety at the re: The Auditors, a blog
by Francine McKenna.
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