Please ensure Javascript is enabled for purposes of website accessibility

EY Hits 50% Failure Rate on PCAOB Inspection, Gets a Grade of LOL on AS5

Posted on by Adrienne Gonzalez

Today, the PCAOB released its latest inspection report on the firm formerly known as Ernst & Young. Now, before we get into that, let's get into a little history because everyone loves history, right?

EY boasted an impressive failure rate of 35.7% in 2011, which was followed up by an even more impressive failure rate of 48% in 2012 and now we have a 2013 number: 50%. Just a thought here but instead of focusing on marketing, talking up diversity, and creating hashtags, perhaps EY should focus on the thing it is supposed to be doing right. But first, let me take a #SelfEY!

Within the 82 page report, we find the usual breakdown:

At this point, we have no choice but to conclude that Auditing Standard No. 5 is just a troll. How else can we possibly explain the fact that it seems so difficult for these firms to get it right?

Perhaps it's time for the PCAOB to offer AS5 webcasts or training or something to help these firms get it. EY especially could use an in-house training, perhaps.

EY's failure rate1 is so bad this year, even McGladrey audits better than they do. Well, at least compared to McG's 2012 report (which was still better than EY's 2012 report). Fret not, haters of any firm that isn't a Big 4 firm, we still have Grant Thornton's report to look forward to and they have a 65% failure rate to live up to.

Issuers A and B gave EY the most trouble, racking up 6 PCAOB dings each. As you can see, AS 5 is the reigning champ of baffling auditors and keeping PCAOB inspectors in a job, with AS 13 coming in a distant second.

Better luck next time, EY?

2013 PCAOB Inspection Report Audit Failure Scoreboard

  • Deloitte: 28%
  • PwC: 33.3%
  • EY: 50%

1 Don't call it an audit failure. But according to the PCAOB: "Whether or not associated with a disclos ed financial reporting misstatement, an auditor's failure to obtain the reasonable assuranc e that the auditor is required to obtain is a serious matter. It is a failure to acco mplish the essential purpo se of the audit, and it means that, based on the audit work performed, the audit opinion should not have been issued."

Related Posts

(UPDATE) Compensation Watch ’12: The Wait Is Over at Ernst & Young

Well, it's here. After getting everyone worked up a month ago, this week marks the […]

Rumor Mill: The Latest E&Y Columbus Details Include $1 Beers

We continue to receive details about the layoffs at E&Y’s Columbus office. The first bit of information is that one of the unlucky few — a recently promoted SA — was given one day to consider taking a transfer to another office. According to our source, the client the SA was serving caught wind of the dismissal and the client’s reaction convinced TPTB to let the SA stay on an additional week to finish his/her work.
Our source also indicated that new manager training was going on at the time and “those [managers] with potentially the best chance to speak on the behalf of those to be axed were all in sunny Florida oblivious to the proceedings.”
Oh and the dollar beers thing. As you may remember, the layoffs occurred the day before the office’s holiday get-down. The rumor is that the festivities had a tab in the nabe of $1,200, which included $1 beers.
This causes us to wonder a few things: A) No open bar? B) Beast or Natty Light? and C) we realize Columbus is a college town but $1 beers? Were there penny pitchers and $3 Jager shots too?
For reasons that escape us, we’re completely enamored with details that continue to emerge from this. Continue to keep us updated.
Earlier:
E&Y Columbus Layoffs Update
Layoff Watch ’09: Update on Ernst & Young’s November Round