October 29, 2020

BDO USA Auditors Are Still Riding On the Struggle Bus, Latest PCAOB Inspection Report Reveals

People who know, know BDO USA has had some of the suckiest audit inspection reports recently among the firms that are annually inspected by the PCAOB. From 2012 to 2017, an average of 59% of BDO audits inspected by the PCAOB had significant errors. Yeesh.

Things were sorta looking better when the PCAOB released BDO’s 2017 inspection report last year, which found deficiencies in nine of the 23 audits reviewed during the 2016 inspection cycle, for a failure rate of 39%. Much improvement over 2016’s deficiency rate of 67%!

Bravo Delta Oscar’s 2018 inspection report was released last week by the PCAOB. So how did they do this time around?

Welp, so much for the quality of BDO audits getting better—problems were found in 48% of BDO’s audits inspected in 2017. For a firm that tells the PCAOB every single year “we are committed in making audit quality our top priority,” why do their auditors make so many mistakes every year?

Here’s a historical look at BDO audit deficiencies, courtesy of a March 2019 report by Compliance Week with updates by us:

  • 2010: 26%
  • 2011: 39%
  • 2012: 55%
  • 2013: 65%
  • 2014: 74%
  • 2015: 52%
  • 2016: 67%
  • 2017: 39%
  • 2018: 48%

BDO audits were the most gruesome in the following areas: performing substantive testing to address a risk of material misstatement (five audits) and testing the design or operating effectiveness of controls selected for testing (five audits).

Plus, there was a lot of non-compliance going on with certain PCAOB standards or rules:

The deficiencies below are presented in numerical order based on the PCAOB standard or rule with which the firm did not comply. We identified the following deficiencies:

  • In one of 23 audits reviewed, the firm did not include all relevant work papers in the final set of audit documentation for retention it was required to assemble. In this instance, the firm was non-compliant with AS 1215, Audit Documentation.
  • In two of five audits reviewed, the firm did not document the substance of its discussions with the audit committee about the potential effects of permissible tax services on the independence of the firm. In these instances, the firm was non-compliant with PCAOB Rule 3524, Audit Committee Pre-approval of Certain Tax Services.
  • In one of five audits reviewed, the firm did not document the substance of its discussions with the audit committee about the potential effects of the relationships that, as of the date of the firm’s annual communication, may have been reasonably thought to bear on the independence of the firm. In this instance, the firm was non-compliant with PCAOB Rule 3526, Communication with Audit Committees Concerning Independence.

You can read all the gory details here.

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