Grant Thornton posted a marked improvement in audit regulatory inspection results with its most recently published report, dating to 2016.
The Public Company Accounting Oversight Board’s latest report on a major firm shows inspectors studied 34 audit files and found problems in eight of them, or 24 percent. That’s an improvement over the same firm’s 2015 findings, where 41 percent of inspected audits contained problems.
The report says 26 of the 34 audits selected for inspection involved both an audit of internal control over financial reporting as well as the audit of the primary financial statements. Of the 8 audits exhibiting deficiencies, four involved problems with the internal control audit and seven shows failures related to substantive testing.
The reports says in four of the eight deficient audits, the firm failed to identify and test controls related to identified risks. In three audits, auditors failed to sufficiently test the design or operating effectiveness of controls selected for testing. Three audits also contained problems in sufficiently evaluating significant assumptions or testing data the issuer used to develop an estimate.
The PCAOB has signaled its 2016 inspection results, as they are published, would show audit firms had not made much progress as a whole in improving inspection results over 2015. Deloitte, the only other major firm to see its 2016 report published, showed no change from 2015 to 2016 in terms of deficiency findings.
Grant Thornton’s rate in 2016 at 24 percent is the best the firm has recorded since deficiency findings across the major firms began spiking in 2010. The firm’s rate has ebbed and flowed during that time, going as high as 65 percent in 2012, then tapering to 55 percent in 2013 and 32 percent in 2014 before jumping back up to 41 percent in 2015.
In its written response to the inspection findings, attached to the public inspection report, the firm says it has taken steps as a result of each of the inspection findings in accordance with auditing standards regarding omitted procedures and subsequent discovery of facts. The letters says the firms seeks to demonstrate its commitment to audit quality through “continually improving inspection results.”