When the PCAOB released its first batch of 2019 inspection reports earlier this year, there was one outcome that left us at Going Concern HQ feeling like we were living in some auditing bizarro world: PwC had a worse audit failure rate (30%) than KPMG (29%).
It’s rare when KPMG doesn’t have the worst PCAOB inspection report of the Big 4, and it’s even more rare when PwC botches more audits than KPMG. Before 2019, the last time KPMG did not have the worst audit deficiency rate among the Big 4 was 2013’s inspection reports, when KPMG had a error rate of 46% but EY did worse at 49%. The last time KPMG had a better deficiency rate than PwC was 2012’s inspection reports, when KPMG had the second-lowest deficiency rate at 34%, followed by PwC at 39% and EY at 48%.
But after the PCAOB released its first batch of 2020 inspection reports earlier this week, all is right in the world: KPMG once again had the worst inspection report of the Big 4. But let’s give the House of Klynveld some credit—the firm’s failure rate decreased from 29% in 2019 to 26% in 2020. And that 26% deficiency rate is the firm’s lowest since its 23% rate in 2011’s inspection reports.
And since its horrifically bad back-to-back 2016 (43% deficiency rate) and 2017 (50% deficiency rate) inspection reports, KPMG has cut the percentage of audits inspected by the PCAOB that weren’t up to snuff by about half.
But as you can tell from the chart above, Klynveldian auditors still have problems with financial statement audits and audits of internal controls over financial reporting. Here are some of the more common mistakes made by KPMG in those two areas, according to the PCAOB:
Most of the faulty audits occurred for clients in the healthcare sector (all six had deficiencies), while KPMG also struggled on audits for clients in the financials, consumer discretionary, communication services, and IT sectors.
Next week we’ll take a look at the 2020 inspection reports for BDO USA and Grant Thornton. If you missed our recaps earlier this week of the 2020 inspection reports for PwC, Deloitte, and EY, just click on the links. In the meantime, if you need some nighttime reading, KPMG’s 2020 PCAOB inspection report is below.
LOL, PwC: For Once, KPMG Doesn’t Have the Worst Audit Failure Rate Among the Big 4
The PCAOB Needs to Just Beat the Sh*t Out of KPMG Already
It’s True: PwC Had a Nearly Flawless 2020 PCAOB Inspection Report
Deloitte Came Oh So Close to Having a Historically Low Audit Deficiency Rate
EY Pats Itself On the Back For Not Blowing As Many Audits As Before