During its inspection of Grant Thornton’s 2005 audits, the Public Company Accounting Oversight Board found several audit deficiencies in the firm’s work at eight companies — including one instance that triggered a restatement. The PCAOB’s finding, in turn, triggered an unusually sharp response from the second-tier independent audit firm.

Released Friday, the PCAOB’s most recent report on Grant Thornton raps the firm on several occasions for not corroborating management’s conclusions and for not providing proof that it had conducted needed testing. For the eight issuers cited in the report, the firm didn’t have enough evidence to support its audit opinions, the board concluded.

Grant Thornton objects to parts of the board’s finding in a June 4 response letter included in the report. The firm uses a much more defensive tone than other big audit firms have in response letters since the PCAOB began doing formal inspections in 2004. “We strongly disagree with the use of overly broad comments such as ‘failed to identify,’ ‘failed to perform,'” wrote Grant Thornton. “They do not adequately describe all of the relevant facts nor do they acknowledge the extent of the procedures that were, in fact, performed by the engagement teams.”

The firm also notes in the letter that improvements made during the past 18 months based on previous PCAOB inspection comments aren’t reflected in the report because of the timing of the inspection process.

Further, Grant Thornton says one of the PCAOB’s findings is factually inaccurate. However, in the other cases, Grant Thornton performed additional procedures or supplemented audit documentation following the regulator’s inspection, according to the firm. The firm has not altered its auditor’s opinion for any of those clients, it says.

Because its auditors don’t pick the company audit clients randomly, but rather look at the highest-risk clients, the PCAOB discourages readers of the report to draw conclusions based on the number of audit deficiencies and issuers listed. And that would be hard to do, as the PCAOB’s public inspections report redacts many specifics about Grant Thornton’s audits, including the names of issuers, what the inspection team found —if anything — related to the audit firm’s quality-control system, and the number of total audits evaluated. The board does say the inspection team did fieldwork in the firm’s national office and 13 of its 49 practice offices.

Here are excerpts from the PCAOB’s findings on Grant Thornton’s 2005 audits:

Issuer A: The firm failed to identify a departure from GAAP.

The issuer should have consolidated a limited partnership in which it had a general partnership interest of almost 90 percent. The remaining limited partnership interest was mostly held by individuals who were related to the issuer. Following the PCAOB inspection, the company restated its financial statements.

In its response letter, Grant Thornton protests that the PCAOB report implies the firm’s auditors did not identify the issue and that the report does not explain the “extent and complexity” that is involved in the professional judgment in this matter.

Issuer B: The firm should have evaluated the basis for one of the company’s accounting policies.

The PCAOB says that while recognizing rental income on a straight-line basis over the term of its leases, the issuer excluded some or all of the future payments for some leases. The firm did not evaluate why the company used this policy or determine whether the issuer had followed this method for these types of leases in the past.

Grant Thornton claims the inspection team’s assessment in this case is not accurate. “We have thoroughly evaluated the issuer’s policy…and the consistency of that policy with the issuer’s historical experience,” the firm writes.

Issuer C: The firm failed to identify a departure from GAAP.

Assuming portions of its oil and gas wells would be sold, the issuer excluded them when calculating its asset retirement obligations. However, SFAS 143, Accounting for Asset Retirement Obligations, requires an ARO liability to be recorded during the time that it is incurred, regardless of whether the asset could be sold.

For this issuer, the firm also did not do enough to test revenues and expenses regarding a consolidated limited partnership with Issuer D. For instance, the PCAOB says, the firm based its expectations for analytical procedures on the prior year’s balances even though the limited partnership’s business had changed significantly since that time.

Issuer E: The firm did not perform adequate procedures related to revenue and expenses for real estate activities.

The firm relied on analytical procedures while testing these amounts but did not corroborate management’s explanation of an unexpected variance in the numbers.

Issuer H: The firm failed to deal with a departure from financial reporting requirements.

The issuer had not disclosed a significant gain on the sale of an asset in its income statement or in the financial statement notes. The PCAOB says this sale was a material, nonrecurring event and accounting for it solely in the cash-flow statement was not enough.