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Deloitte’s 2012 PCAOB Inspection Report Shows That the Firm Is Less Awful at Auditing Than It Used to Be

The PCAOB news is not letting up. Today, the Board released the 2012 inspection report for Deloitte. Considering the turnaround time in years past, this is pretty fast. The 2011 report was issued last December.

If you count yourself as one of those people who enjoy A) reading these reports and B) quality auditing, then you will be pleased. Take it easy, you won't be that pleased, but you'll be happy to know that the PCAOB has expanded Part I of the report and Deloitte doesn't suck at auditing nearly as much as it used to.

Here's a shortlist of things you might want to know:

  • PCAOB inspectors performed fieldwork on 51 audit engagements at 31 of Deloitte's 66 U.S. offices.
  • Thirteen different issuers were cited as having deficiencies in the audits of their financial statements.
  • After the list of deficiencies, there is a brief discussion about the Audit Standards applicable to the deficiencies with AU 230, Due Professional Care in the Performance of Work, AS No. 5, AS No. 13, and AS No. 15 getting extra attention. Then, there's this handy table that helps summarize:

Part I also includes some "General Information Concerning PCAOB Inspections" which is probably more than you ever wanted to know including this: "Board inspection reports are not intended to serve as balanced report cards or overall rating tools." UDPATE: I've been informed that this language is not new in the reports, but it does have the tendency to jump around.

I suppose we have to give some credit to both parties here: For the PCAOB, they are attempting to make these reports a little more informative and timely. For Deloitte, if you consider the fact that the firm's error rate was 45% in the 2010 reportthe quality of the audits are better than they used to be.

And you get the sense that Deloitte is quietly aware of their improvement. Their response to the PCAOB is three paragraphs of pure boilerplate; also a far cry from the combative letter they wrote in 2009. Is everyone honestly trying to get better at this? I'll reserve my excitement for now.

Why? Because it's still easy to be cynical about these reports. So if you have the energy after a three-day weekend — I sure as hell don't — you may express any doubts now.

2013 Deloitte Touche LLP 2012

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