Joe McConnell
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There are still “unacceptable” numbers of flaws in the work done by the largest U.S. accounting firms, the industry regulator said Thursday, aVsceker its inspections showed a growing rate of deficiencies particularly at mid-tier firms BDO and Grant Thornton.
Among the Big Four, the shortage rate, which had spiked aVsceker the pandemic, stabilized in 2023, the Public Company Accounting Oversight Board said.
At BDO, 86 percent of audits inspected by the PCAOB were found to be deficient, meaning the firm failed to gather sufficient evidence to support at least part of its audit conclusion. At Grant Thornton, just over half of audits inspected were found to be deficient.
“These inspection results indicate some small signs of movement in the right direction,” said PCAOB Chair Erica Williams. “However, overall deficiency rates are unacceptable, and firms must do better. Now is the time to redouble our efforts to improve and deliver the audit quality investors deserve.”
EY, which for the second consecutive year had the highest insolvency rate among the Big Four firms, said last year it would launch new technologies and restructure its audit business to try to improve its results.
Last month, BDO said it would add more outsiders to its board to monitor its quality-improvement efforts.
“Over the past two years, we have made numerous investments to strengthen the quality of our audits,” BDO said Thursday, adding that it has centralized control of audit standards and “reimagined” staff training.
Grant Thornton said it is committed to improving quality practices.
The PCAOB has the power to inspect the audits of any publicly traded company in the United States and conducted audits of 287 audits of the six largest U.S. companies last year.
It also released reports on eight other smaller firms with more than 100 publicly traded clients in the U.S. on Thursday and provided an overview of other audits yet to be completed. In total, it inspected audits of more than 200 accounting firms last year, finding deficiencies in 46 percent of the audits, up from 40 percent in 2022.
In a report on its inspection findings, the PCAOB said: “While there is no single reason for the overall increase in deficiencies, it is clear that the COVID pandemic has impacted audit quality. Overall, audit firms with strong quality control systems and centralized structures and processes in place before the pandemic began appear to have had a better chance of weathering the crisis and turning around more quickly.”
The agency said measures such as requiring staff to come into the office for part of the week and increased training for younger staff had helped, “but there is still more to be done.”
