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January 27, 2023

Grant Thornton’s 2021 PCAOB Inspection Report Wasn’t Too Bad

Of the six 2021 PCAOB inspection reports released before the holidays, we’ve so far taken a look at five: PwC, Deloitte, EY, KPMG, and BDO USA. The last of the bunch belongs to Grant Thornton. We didn’t save the best for last, but it’s not that bad either.

From 2016 until its 2020 inspection report, Grant Thornton had an average audit failure rate of about 21%. Not bad for a firm that had an average audit failure rate of 44% from 2010 to 2015. For 2021, GT’s audit failure rate is right around its most recent five-year average:

Our 2021 inspection report on Grant Thornton LLP provides information on our inspection to assess the firm’s compliance with Public Company Accounting Oversight Board (PCAOB) standards and rules and other applicable regulatory and professional requirements. This executive summary offers a high-level overview of:

Part I.A of the report, which discusses deficiencies (“Part I.A deficiencies”) in certain issuer audits that were of such significance that we believe the firm, at the time it issued its audit report(s), had not obtained sufficient appropriate audit evidence to support its opinion(s) on the issuer’s financial statements and/or internal control over financial reporting (ICFR); and

Part I.B of the report, which discusses deficiencies that do not relate directly to the sufficiency or appropriateness of evidence the firm obtained to support its opinion(s) but nevertheless relate to instances of non-compliance with PCAOB standards or rules.


Seven of the 31 audits we reviewed in 2021 are included in Part I.A of this report due to the significance of the deficiencies identified. The identified deficiencies primarily related to the firm’s testing of controls over and/or substantive testing of revenue and related accounts and inventory.

Seven botched audits out of 31 inspected comes out to a failure rate of 22.6%, the same rate as its 2019 inspection report but not as good as its 17.2% rate in 2020, which was an all-time best for Grant Thornton.

For 2021, five audits had problems in both internal control over financial reporting and in the financial statement, one had deficiencies in the financial statement only, and one had deficiencies in ICFR only. The most common Part I.A deficiencies in 2021 related to identifying controls related to a significant account or relevant assertion, testing controls over the accuracy and completeness of data or reports used in the operation of controls, evaluating the appropriateness of the issuer’s accounting method or disclosure, and performing substantive testing to address a risk of material misstatement, according to the PCAOB.

Three areas of the audit that Grant Thornton auditors found problematic were:

  • Revenue and related accounts: The deficiencies in 2021 (as well as in 2020 and 2019) related to substantive testing of, and testing controls over, revenue.
  • Inventory: The deficiencies in 2021 related to substantive testing of, and testing controls over, the valuation of inventory.
  • Business combinations: The deficiencies in 2021 (as well as in 2020 and 2019) primarily related to substantive testing of, and testing controls over, the reasonableness of assumptions used by the issuer to determine the fair values of acquired intangible assets.

Grant Thornton auditors nailed all of their audits for issuers in the energy, financials, and real estate sectors, but they flubbed three out of 11 audits reviewed for issuers in the industrials sector, half of the audits inspected for issuers in the IT and communication services sectors, one out of three for issuers in health care, and one out of five for issuers in the consumer discretionary sector.

Ever read a Grant Thornton inspection report from the PCAOB? If not, now’s your chance.

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