Apparently someone inside EY blabbed to Financial Times about the current state of EY audit quality and the firm “expects more failing grades” from the PCAOB specifically related to work performed offshore for US-listed clients. Their last inspection wasn’t so great, the PCAOB identified deficiencies in twelve of the 56 audits inspected for a deficiency rate of 21.4%–the worst score EY’s gotten since 2018. The next inspection report should be out in November or December.
Here’s what FT said:
EY’s auditors outside the US are failing a higher number of quality inspections by American regulators, according to the firm’s internal estimates, as US authorities push to improve global standards they fear were hit by the coronavirus pandemic.
Inspections of EY’s work for US-listed companies uncovered deficiencies in up to 38 per cent of the audits carried out by the firm’s overseas businesses last year, according to estimates described to the Financial Times.
That would be a big jump from 2021, when 21 per cent of audits sampled by the Public Company Accounting Oversight Board contained deficiencies.
The figures do not include inspections of audits carried out by EY’s US business — the largest in its global network — and could be lower if the firm successfully pushes back against concerns raised by the PCAOB before inspection reports are finalised. However, they hint at a trend since the pandemic that has alarmed the regulator.
The PCAOB inspected 37 audits carried out by EY’s non-US businesses last year, and EY estimated that the increase in deficiencies would be largely consistent across the Americas, Europe and Asia-Pacific.
Said EY to FT, “[The firm] actively reviews audit quality results from both internal and external monitoring. The figures reported by the Financial Times are from a preliminary stage of that process, during which areas for additional focus are identified. The figures do not reflect the ultimate conclusions drawn from that process.”
EY expects more failing grades from US audit inspectors [FT]
this is why the Big 4 should never hire indians, chinese, various south americans as auditors. they are completely lazy with US standards and always look for shortcuts. KPMG relies heavily on indians for our audit fieldwork and the work they return is complete garbage. They don’t understand auditing as it applies in the US. can not stand them.
Completely agree. In addition, they are just too far removed from the engagement in general. Their feet arent held as close to the proverbial fire in the sense that if the PCAOB does come down with the hammer, its not on them.