The Public Company Accounting Oversight Board (PCAOB) this week published 2020 inspection reports for a handful of large U.S. audit firms outside the Big Four.
RSM, Crowe, Moss Adams, Marcum, and Cohen & Company each had their inspection reports dated Dec. 16, 2021. Of the group, Cohen & Company fared best, with all nine of its audits reviewed returning no deficiencies.
Results were less positive for Marcum, which had nine of its 14 audits reviewed flagged for deficiencies. The PCAOB noted the following deficiencies regarding audits of financial statements:
- Lack of sufficient testing of data or reports used in the firm’s substantive testing (four audits).
- Lack of sufficient testing related to an account or significant portion of an account or to address an identified risk (three).
- Insufficient evaluation of the appropriateness of the issuer’s accounting method or disclosure for one or more transactions or accounts (two).
- Insufficient evaluation of significant assumptions or data the issuer used in developing an estimate (two).
The two most frequent deficiencies were also problematic for Marcum during 2019 inspections, when it had six of 12 audits flagged. Audit areas containing deficiencies in 2020 included revenue and related accounts (five audits), inventory (two), and investment securities (two).
“As we have after every inspection, we carefully considered the matters brought to our attention in connection with the 2020 inspection and have taken actions to enhance our policies and procedures as part of our commitment to the highest standards of audit quality,” said Marcum in response to the PCAOB’s report.
Also returning mixed results were the 2020 audits of RSM, with seven of 15 inspected including deficiencies, according to the PCAOB. Like Marcum, problem areas included evaluation of significant assumptions, sufficient testing of data or reports, and evaluation of the appropriateness of the issuer’s accounting method (two audits apiece).
Audit areas containing deficiencies included revenue and related accounts (four audits) and allowance for loan losses (two). RSM only had three of 15 audits flagged for deficiencies during 2019 inspections.
“We have thoroughly evaluated the matters described in … the draft report and have taken appropriate actions to address the findings in accordance with PCAOB rules and auditing standards and our policies,” said RSM Managing Partner and Chief Executive Joseph Adams and National Audit Leader Joel Shamon in response.
Crowe had four of 15 audits inspected in 2020 return deficiencies, each regarding evaluation of significant assumptions. Moss Adams had three of 12 audits inspected return deficiencies, most notably regarding sufficient testing related to an account or significant portion of an account.
The PCAOB in November published its 2020 inspection reports for the Big Four.