The Public Company Accounting Oversight Board (PCAOB) said half of the 52 audits it inspected from top accounting firm KPMG were seriously deficient and KPMG was not as committed to quality as the accountancy claimed.
“In 26 audits, certain of these deficiencies were of such significance that it appeared to the inspection team that the firm, at the time it issued its audit report, had not obtained sufficient appropriate audit evidence to support its opinion,” the PCAOB said in its report.
The accounting watchdog also released a revised inspection report for 2016 that found deficiencies in 22 of 51 engagements.
Some of the most common deficiencies occurred in the area of revenue and included failures to sufficiently test the design or effectiveness of controls.
“Audit quality has been and continues to be a top priority across all levels of KPMG, and we are committed to improving our performance and our system of audit quality control to ensure that we provide consistently high-quality audits,” the company said in a statement.
“The firm has made – and will continue to make – significant investments in our people, technology, and governance, to achieve this goal. We respect and welcome all PCAOB feedback, and share the goal of enhancing audit quality,” the company said. “We understand and appreciate our responsibility to our stakeholders and are committed to working constructively with the PCAOB in the months and years to come.”
The Big Four have been pushing back against efforts by regulators in the U.K., who have proposed breaking the firms up.
In January 2018, certified public accountants, including former staffers at the PCAOB, were charged with a scheme to misuse confidential information relating to the PCAOB’s planned inspections of KPMG, but the company said it has been taking steps to improve the quality of its audits, including added two independent directors.