PCAOB inspection finds deficiencies in a number of KPMG US audits

DEFICIENCIES in a number of KPMG US audits have been found by the US’s accounting watchdog in its latest annual inspection.

The Public Company Accounting Oversight Board (PCAOB) 2013 inspection included reviews of portions of 50 audits performed by the Big Four firm. The team conducting the probe found elements it considered to be deficient in the performance of the work it reviewed.

The board said some of the deficiencies identified were of “such significance that it appeared to the inspection team that the firm, at the time it issued its audit report, had not obtained sufficient appropriate audit evidence to support its opinion that the financial statements were presented fairly, in all material respects, in accordance with applicable financial reporting framework and/or its opinion about whether the issuer had maintained, in all material respects, effective internal control over financial reporting (‘ICFR’)”.

It felt that in these audits, the auditor had issued an opinion “without satisfying its fundamental obligation to obtain reasonable assurance about whether the financial statements were free of material misstatement and/or the issuer maintained effective ICFR”.

However, it stressed that even though deficiencies in an audit had reached this level of significance it does not necessarily indicate that the financial statements are misstated or that there are undisclosed material weaknesses in ICFR. “It is often not possible for the inspection team, based only on the information available from the auditor, to reach a conclusion on those points.”

In a written response to the PCAOB, KPMG US said: “KPMG has established a culture built on an absolute commitment to performing consistently high-quality audits. We share the PCAOB’s objectives of continually improving audit quality, building confidence in the auditing profession and meeting our responsibilities to investors and other participants in the capital markets system…

“We understand our responsibility to the capital markets, and are committed to continually improving our firm and working constructively with the PCAOB to improve audit quality.”

Firms inspected by the PCAOB are not penalised in any way as the inspections are solely intended to evaluate the firms’ performance and provide a spotlight on areas that are ripe for potential improvements.