Regulator again slams Deloitte audits
The regulator of accounting firms in the United States says Deloitte & Touche for two consecutive years had failed to correct deficiencies in its audit procedures to its satisfaction.
The Public Company Accounting Oversight Board said that in 2009 it told Deloitte that evidence from the board's inspection of several of the firm's audits suggested "that important issues may exist" regarding "the sufficiency of the firm's emphasis on the critical need to exercise due care and professional scepticism when performing audits". It pointed to instances where the firm had failed to do enough work to check things it was told by management.
In the year after that, the board said, the firm did not fix the problems to its satisfaction.
But, in an indication that Deloitte has since improved, the board allowed Deloitte to say that criticism in its two subsequent annual reviews, in 2010 and 2011, had been acted upon satisfactorily.
"We believe the PCAOB's determinations concerning our remediation of the quality control criticisms" in the 2009 and 2010 inspection reports "are reflective of the significant progress we have made towards the achievement of our audit quality objectives in more recent years," Deloitte chief executive Joe Echevarria and the head of the firm's audit business, Greg Weaver, said.
They cited the fact that the most recent board review had found problems with fewer audits as evidence that "we are experiencing a positive trajectory".
The tone of that statement was in sharp contrast to the one the firm issued in 2009, when the first part of the report was released. Then, in a statement signed by the firm but not by any individual, it challenged the board's conclusions on several audits, saying Deloitte auditors "made and documented well-reasoned and supported judgments during the audit".
"In our view," the firm said at the time, "such reasonable judgments should be inspected and not second-guessed."
Under the Sarbanes-Oxley Act, which established the board in 2002, the regulator inspects top firms each year and releases a report discussing any deficiencies in the audits it reviewed.
A second part of the report, concerning broader deficiencies at the firms, is kept secret unless the firm fails to correct the problems within 12 months.
In 2011, Deloitte became the first large firm to suffer such a rebuke. Since then, PwC and Ernst & Young also had secret reports released. Of the big four firms, only KPMG has so far not had such a report released.
New York Times
InvestSMART FORUM: Come and meet the team
We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.
Want access to our latest research and new buy ideas?
Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.Sign up for free