Please ensure Javascript is enabled for purposes of website accessibility

BDO Keeps Pace with Rival Audit Firms in Terrible PCAOB Inspection Reports

For whatever reason, BDO was excluded in the last-minute lump of coal the PCAOB delivered to Deloitte, Ernst & Young, and Grant Thornton right before Christmas, but that doesn't mean their inspection report wasn't in the same class of quality. 

The Board inspected audits at 16 of BDO's 35 offices, inspecting 23 audits with 9 of those having deficiencies; that's comes to a 39% rate of audits that weren't up to snuff.

The deficient audits have the run-of-the-mill stuff we're all used to — not enough control testing for material accounts; not enough substantive testing on various types of material accounts such as revenue, A/R, inventory, COGS, etc.; a couple instances of dodgy work around the percentage-of-completion method; an instance of insufficient work around VIEs. You know, the ushe.

But there is one derpity moment in BDO's inspection report that is worth singling out and it comes from Issuer H:

In this audit, the Firm failed to sufficiently test the customer receivables and payables. The Firm sent requests for positive confirmation, as of an interim date, to a sample of customers with outstanding balances. The Firm did not receive responses to approximately 60 percent of those requests. The Firm failed to perform sufficient alternative procedures to determine whether the amounts related to the non-responding customers were correct, as its procedures were limited to determining that the customer's signature was on file and that the issuer had approved the establishment of the account. 

Two thoughts:

1) Is this lazy? It depends, I guess. If there were 1,000 confirmations sent, would you want run down the 600 or so that either went missing or were received by people who took one look at the form, shrugged, and went back to their Facebook page? If we're talking about only following up on 50 or 60 confirmations, then yeah, that's a little lazy.

2) Is this sloppy? For sure. 

But really, BDO is no different than any of the other firms. Let's look at the problem rates for 2011:

  • KPMG — 23%
  • Ernst & Young — 36% 
  • BDO — 39%
  • PwC — 41%
  • Deloitte — 42%
  • Grant Thornton — 43%

They barely managed to break the 40% barrier and that was good enough for 3rd place.

My friends, this is where audit quality stands today amongst the top firms in the world. Yeesh.

[via PCAOB]

Latest Accounting Jobs--Apply Now:

Have something to add to this story? Give us a shout by email, Twitter, or text/call the tipline at 202-505-8885. As always, all tips are anonymous.

Related articles

Layoff Watch ’23: BDO USA Cuts 85 People in Advisory, Wishes Them the Very Best on the Way Out the Door

Fresh off the rumor mill: BDO USA has cut 85 people from advisory, announced via internal email from brand new advisory head Eskander Yavar to all of his service line this afternoon. We were provided part of the email which reads: Today was a difficult day for our practice — we reduced our workforce by […]

Carmine Di Sibio at WSJ summit

BDO Will Audit EY Consulting, or Whatever That Business is Gonna Be Called

The Wall Street Journal has written a pretty detailed account of comments EY Global Chairman and CEO Carmine Di Sibio made to WSJ’s CFO Network Summit earlier this week, scroll down to skip past a bunch of words and watch the clip. Of note, the split vote is now expected to happen in April. “I […]