PCAOB Finds Deficiencies at 21 Audit Firms

November 28, 2022

The PCAOB identified deficiencies in the work of 21 audit firms in the board’s most recent round of inspection reports, released Nov. 22, 2022. The board cleared another four firms.

PCAOB reports’ inspection observations cover two separate categories: audits with unsupported opinions (Part I.A), and other instances of non-compliance with PCAOB standards or rules (Part I.B). For those firms falling into the second category, PCAOB inspectors did not identify any deficiencies rising to the level of significance where they believed the firm had not obtained sufficient appropriate audit evidence to support its opinions on the issuer’s financial statements and/or Internal Control over Financial Reporting (ICFR). The firms with solely Part I.B deficiencies were Brightman Almagor Zohar & Co., Lynda R. Keeton CPA, LLC, Deloitte Touche Tohmatsu LLC, and Pistrelli, Henry Martin y Asociados S.R.L..

The firms with Part I.A deficiencies included Big Four affiliate KPMG Accountants N.V. in the Netherlands, where inspectors found problems in the ICFR audit related to certain assets and liabilities at a client identified as Issuer A.

The firm, according to the report, selected a control for testing “that consisted of the validation of models used by the issuer to value certain assets and liabilities.”

“The firm did not evaluate the specific review procedures that the control owners performed to validate the models, including the procedures performed to determine whether each model was appropriate for its intended use and to evaluate model performance,” the PCAOB stated in the report. “In addition, the firm did not identify and test any controls over the accuracy and completeness of the data used in the operation of this control.”

The firm also identified multiple deficiencies in the controls over certain assets and liabilities it selected for testing, but “did not evaluate the severity of each control deficiency to determine whether the deficiency, in combination with other deficiencies, constituted a material weakness,” according to the report.

KPMG Accountants N.V., in its response, said it conducted a thorough evaluation of the matters identified by the PCAOB and took “appropriate actions to address the findings in a manner consistent with PCAOB standards and KPMG policies and procedures.”

The 21 firms where the PCAOB identified deficiencies were:

1. Bernstein & Pinchuk LLP, in New York, with no clients for which the firm was the principal auditor at the outset of the inspection.
2. Brightman Almagor Zohar & Co., in Tel Aviv, Israel, with 16 clients for which the firm was the principal auditor at the outset of the inspection. The firm also participated in 6 audits in which it was not the principal auditor.
3. Fitzgerald & Co., CPAS, P.C., in Vienna, Virginia, with one client for which the firm was the principal auditor at the outset of the inspection.
4. KBL, LLP, in New York, with one client for which the firm was the principal auditor at the outset of the inspection.
5. KPMG Accountants N.V., in Amstelveen, the Netherlands, with four clients for which the firm was the principal auditor at the outset of the inspection. The firm also participated in 25 audits in which it was not the principal auditor.
6. Mayer Hoffman McCann P.C., in Kansas City, Missouri, with 37 clients for which the firm was the principal auditor at the outset of the inspection.
7. Mazars USA LLP, in New York, with 17 clients for which the firm was the principal auditor at the outset of the inspection.
8. Moore Assurance S.A.S., in Bogota, Colombia, with one client for which the firm was the principal auditor at the outset of the inspection.
9. Sadler, Gibb & Associates, LLC, in Draper, Utah, with 42 clients for which the firm was the principal auditor at the outset of the inspection.
10. Saturna Group Chartered Professional Accountants LLP, in Vancouver, Canada, with two clients for which the firm was the principal auditor at the outset of the inspection.
11. Berry, Dunn, McNeil & Parker, LLC, in Portland, Maine, with four clients for which the firm was the principal auditor at the outset of the inspection.
12. Deloitte Touche Tohmatsu LLC, in Tokyo, with two clients for which the firm was the principal auditor at the outset of the inspection. The firm also participated in 18 audits in which it was not the principal auditor.
13. Elliott Davis, LLC, in Greenville, South Carolina, with 16 clients for which the firm was the principal auditor at the outset of the inspection.
14. Lynda R. Keeton CPA, LLC, in Henderson, Nevada, with one client for which the firm was the principal auditor at the outset of the inspection.
15. MSPC, Certified Public Accountants and Advisors, A Professional Corporation, in Cranford, New Jersey, with five clients for which the firm was the principal auditor at the outset of the inspection.
16. Pistrelli, Henry Martin y Asociados S.R.L., in Buenos Aires, Argentina, with six clients for which the firm was the principal auditor at the outset of the inspection. The firm also participated in 19 audits in which it was not the principal auditor.
17. RAM ASSOCIATES, in Hamilton, New Jersey, with no clients for which the firm was the principal auditor at the outset of the inspection.
18. Swalm & Associates, P.C., in Richardson, Texas, with three clients for which the firm was the principal auditor at the outset of the inspection.
19. SyCip Gorres Velayo & Co., in Makati City, Philippines, with one client for which the firm was the principal auditor at the outset of the inspection. The firm also participated in 12 audits in which it was not the principal auditor.
20. Total Asia Associates PLT, in Kuala Lumpur, Malaysia, with 15 clients for which the firm was the principal auditor at the outset of the inspection.
21. WSRP, LLC, in Salt Lake City, Utah, with six clients for which the firm was the principal auditor at the outset of the inspection.

The remaining firms were cleared by the PCAOB:

1. Blue & Co., LLC, in Carmel, Indiana, with six clients for which the firm was the principal auditor at the outset of the inspection.
2. Ernst & Young Auditores Independentes S.S., in Sao Paulo, Brazil, with 13 clients for which the firm was the principal auditor at the outset of the inspection. The firm also participated in 54 audits in which it was not the principal auditor.
3. Deloitte & Touche, in Taipei, Taiwan, with six clients for which the firm was the principal auditor at the outset of the inspection. The firm also participated in four audits in which it was not the principal auditor.
4. Grant Thornton Auditores Independentes Ltda, in Sao Paulo, with two clients for which the firm was the principal auditor at the outset of the inspection. The firm also participated in four audits in which it was not the principal auditor.

[Thomson Reuters]