TheCorporateCounsel.net

In late February, the PCAOB issued its most recent inspection reports on the Big 4 accounting firms, and according to this WSJ article, the results were not great:

Several U.S. accounting giants had greater deficiencies in their audits of public companies’ 2021 financial statements compared to the previous year, according to annual inspection reports released Wednesday by the Public Company Accounting Oversight Board. The regulator, which compiles its findings with a lag, inspected 215 audits conducted by the Big Four accounting firms in the U.S.—Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers—down from 220 a year earlier. Deloitte, EY and PwC had an average deficiency rate of about 24%, up from roughly 13% a year earlier.

What about KPMG? The article says that KPMG’s deficiency rate was redacted from the PCAOB’s inspection report for some reason, so we don’t have data on that right now.

It seems to me that these latest inspection reports are a relevant data point to consider when contemplating the proposed revised NOCLAR standard discussed in this morning’s first blog. In an environment in which the nation’s top audit firms are evidently struggling with quality control issues & are confronting a growing shortage of accountants, adopting a demanding new auditing standard on noncompliance with laws and regulations may not just be a bad idea, but a potential recipe for disaster.

– John Jenkins