The Public Company Accounting Oversight Board in the US recently revealed findings from a six-month investigation of the nation's Big Four accounting firms.
The limited inspections mandated by the Sarbanes-Oxley Act were conducted between June and December 2003 to provide the board with a baseline understanding of the firms' internal systems of quality control over auditing.
The PCAOB said the inspections of Deloitte & Touche, Ernst & Young, KPMG and PricewaterhouseCoopers uncovered “significant audit and accounting issues that were missed by the firms and identified concerns about significant aspects of each firm's quality controls systems.” But the PCAOB continued to express confidence in the firms' auditing capabilities.
“As our reports state, their emphasis on criticisms do not reflect any broad negative assessment of the firms' audit practices,” said PCAOB Chairman William J. McDonough. “None of our findings has shaken our belief that these firms are capable of the highest quality auditing. The board is also encouraged by the firms' demonstrably cooperative attitude toward our inspections, which are designed to drive the firms to improve any aspects of their practices that may stand as impediments to the highest quality audit performance.”
The Sarbanes-Oxley Act of 2002 requires the PCAOB to conduct annual inspections of registered accounting firms that audit more than 100 public companies. The four firms that consented to the limited inspections in 2003 and four other U.S. firms are subject to full inspections in 2004. Final inspection reports are provided to the Securities and Exchange Commission and certain state authorities and made available to the firms, as provided in the board's rules.
With the reports, the PCAOB issued a statement concerning the issuance of inspection reports, describing in detail the nature of the inspections, statutory limitations on public disclosure of parts of the reports and other matters related to the reports.
The statement and the reports are available under “Inspections” at www.pcaobus.org. Or click on the direct links below (PDFs):