While audit inspection findings across the major firms generally improved in the most recently reported year, such was not the case at Grant Thornton, whose report shows an increase in criticisms.
The Public Company Accounting Oversight Board’s recently published 2015 report on 2014 engagements at Grant Thornton shows inspectors selected 34 audits for inspection and found fault with 14 of them, or 41 percent. That’s an increase from the 32 percent of audits called out for problems in 2014 at the firm, although still better than the firm’s 55 percent rate in 2013.
Among the Big 4, three of the four firms saw improvement in their inspection results from 2014 to 2015. PwC improved its rate of deficiency from 29 percent to 22 percent, although half of the inspected audits contained problems so serious they led to either withdrawn opinions on internal control or restatements. EY whittled off six percentage points from its deficiency rate, and KPMG dropped its rate from 54 percent to 38 percent. Only Deloitte saw an uptick, from 21 percent, the lowest of all the major firms that year, to 24 percent the following year.
As with most other firms, the majority of the criticisms at Grant Thornton focused on internal control over financial reporting. Nine of the 14 flawed audits contained problems in complying with Auditing Standard No. 5, which governs the audit of internal control. Inspectors called out a total of 15 separate mistakes across the nine audits containing ICFR concerns.
Behind internal controls, the next most common area of mistake involved the auditor’s response to the risk of material misstatement. Inspectors found problems with compliance with that auditing standard in eight separate audits. The report says inspectors found numerous instances where auditors didn’t adequately evaluate assumptions or estimates, or didn’t perform sufficient testing meant to address a particular risk.
In a written statement, Grant Thornton said it remains committed to audit quality. “In recent years, we’ve taken a number of significant actions, and also invested in new resources, to ensure high quality audits,” the firm said. “Our internal inspection results since 2015 indicate strong continued improvement in audit quality.”
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