U.S. watchdog finds more Deloitte audit problems

Tue Dec 20, 2011 7:32pm EST

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(Reuters) - The U.S. audit industry watchdog uncovered numerous deficiencies in an inspection of accounting giant Deloitte & Touche, the latest in a series of negative findings against major accounting firms.

According to the 2010 inspection by the Public Company Accounting Oversight Board (PCAOB), released on Tuesday, problems were found in 26 of the 58 audits reviewed by the board.

That figure is up from a 2009 inspection of Deloitte in which the PCAOB uncovered problems in 15 out of 73 audits.

Under its rules, the PCAOB, in some circumstances, must delay for a year the public release of negative findings from an inspection report.

The PCAOB said it identified many problems with Deloitte's audits of public companies, including failure to obtain sufficient and appropriate audit evidence to support audit opinions, and failures to test certain controls.

In one instance, where Deloitte was not the principal auditor but helped in the audit, PCAOB said one deficiency found was "of such significance that it appeared to the inspection team that the firm had not obtained sufficient appropriate audit evidence to fulfill the objectives of its role in the audit."

Deloitte, one of the world's four largest accounting and audit firms, said it taken actions to address each of the PCAOB's findings.

"We are also addressing those areas where the PCAOB has offered observations with respect to our system of quality control and broader matters related to audit quality," said Deloitte spokesman Jonathan Gandal.

The PCAOB was created in 2002 by the post-Enron Sarbanes-Oxley corporate governance and accounting reforms.

In recent years, the audit watchdog has started taking a harder look at major accounting firms.

In November, the board found shortcomings at two of Deloitte's competitors.

At PricewaterhouseCoopers, the PCAOB found 28 problem audits out 76 audits reviewed, up from nine in their prior inspection. Problems were also found at 12 of 54 KPMG audits reviewed, up from eight.

Earlier this year, the PCAOB released a separate report from 2007 inspections that documented deficiencies with Deloitte's own internal procedures for how it conducts audits.

Those findings have prompted a U.S. Senate panel to launch a probe into the auditing standards at Deloitte, which conducts some auditing work for the U.S. government, including the Federal Reserve.

(Reporting By Sarah N. Lynch in Washington and Nanette Byrnes in Chapel Hill, N.C.; additional reporting by Dena Aubin in New York; Editing by Kevin Drawbaugh and Tim Dobbyn)

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