By Cydney Posner
According to this article in Compliance Week, the most audit deficiencies flagged in 2013 inspections by the PCAOB were in the areas of internal control over financial reporting, audit procedures around accounting estimates, and auditor consideration of the risks of material misstatements. Testing of controls was a particular problem, as auditors fell short when it came to testing of important controls or in-depth probing of management review controls. The PCAOB has admonished firms for several years to improve their efforts to identify and test controls and to better scrutinize management review controls. While it's too soon to tell whether the significant investments in improvements made by many firms has led to much progress, the article does report on PCAOB inspections for 2012. These "showed failure rates among the Big 4 firms ranging from a low of 25 percent of all audits inspected at Deloitte to 48 percent at EY. For Deloitte, that was a significant improvement over the 41.5-percent failure rate at Deloitte in 2011, but an increase from 35.7 percent at EY. The big spike in audit failure rates occurred from 2009, when failure rates across the eight largest firms ranged from 8.6 percent to 24.2 percent, to 2010, when failure ranged from 20.6 percent to 61.5 percent. Firms have forewarned companies that PCAOB inspection findings are driving the issues auditors will raise during their year-end audit work."