PCAOB Releases Detailed Findings of KPMG Audit Inspection, Shedding Light on Deficiencies and Regulatory Oversight

The Public Company Accounting Oversight Board (PCAOB) has taken a significant step by publishing the comprehensive results of its 2022 inspection of KPMG, one of the Big Four firms, after the initial report had more than two dozen redactions. This move, announced by the PCAOB on Friday, comes as a replacement for the original report issued in February, which had stirred curiosity within the audit community due to the unusual redactions made by the regulatory body.

Delving into the updated report provides insights into the inspection findings, revealing a deficiency rate of 29.6 percent among the 54 KPMG audits scrutinized. This places KPMG in the middle among its Big Four counterparts, trailing behind PwC (9.3 percent) and Deloitte (17 percent) but ahead of EY (46.3 percent). Despite this, the slight uptick in deficiency rate for KPMG compared to previous cycles indicates areas where improvement is warranted.

In response to the findings, KPMG has reiterated its commitment to continuous improvement, emphasizing the significant changes made to bolster audit execution in recent years. The firm has underlined the effectiveness of these changes in enhancing audit quality and has expressed determination to uphold its leadership position within the profession.

A notable aspect highlighted by the PCAOB is the possible rationale behind the redactions in the initial report, which may have been linked to an unnamed issuer in the information technology sector. Here, a single deficiency related to income taxes was identified by KPMG, leading to the redaction of this issuer's audit details. This sheds light on the regulatory considerations guiding the disclosure of audit findings.

Moreover, the comprehensive report delves into specific areas of concern within KPMG's audit procedures, such as testing related to significant accounts or disclosures and issues stemming from overreliance on controls when obtaining sufficient evidence. These insights underscore the importance of robust audit practices and adherence to regulatory standards in ensuring the integrity of financial reporting.

In addition to the examination of KPMG's audit practices, the PCAOB has also released the 2022 inspection results for KPMG UK, which revealed no deficiencies among the three audits reviewed. This further underscores the significance of ongoing scrutiny and evaluation in maintaining audit quality and regulatory compliance within the industry.

By fLEXI tEAM