The main U.S. auditor watchdog faulted Deloitte & Touche LLP on Monday for failing to promptly improve quality controls after problems were found in some audit 2007 inspections.
The Public Company Accounting Oversight Board (PCAOB) said Deloitte's quality control procedures may not have been adequate to assure proper audits. Specifically, the board said Deloitte auditors on nine of the 61 audits it reviewed did not obtain adequate evidence to support their opinions.
Auditors also may not have exercised proper skepticism or properly challenged management estimates, the PCAOB said.
"We have complete confidence in our professionals and the quality of our audits, and agree that there were and always will be areas we can improve," Deloitte Chief Executive Joe Echevarria said in a statement. "We have been making a series of investments focused on strengthening and improving our practice, and will continue to do so to make Deloitte the standard for audit quality."
Deloitte LLP is the U.S. arm of global network Deloitte Touch Tohmatsu, the world's second-largest accounting and consulting firm.
Some of the audit deficiencies were first disclosed in a May 2008 inspection report, though criticisms of Deloitte's quality control procedures were not made public before so that Deloitte could have time to address the problems.
The PCAOB gives auditors 12 months to fix quality control procedures before making them public. Its disclosures on Monday indicate that Deloitte did not address problems in that 12-month time frame, but do not reflect improvements Deloitte may have made afterward, the PCAOB said in a statement.
In previously sealed sections of its 2008 inspection report, the PCAOB said "important issues" may have existed regarding Deloitte's training and supervision, as well as auditors' evaluations of management estimates.
The PCAOB did not disclose the companies Deloitte was auditing when the problems were identified.
The PCAOB was created by the 2002 Sarbanes-Oxley act to inspect and sanction auditors after a rash of accounting scandals let to the downfall of companies such as Enron and WorldCom.
(Reporting by Dena Aubin)