When you talk about the worst PCAOB inspection reports of all time, the 2017 one for RSM US has to be in the conversation. During that inspection cycle, the PCAOB found significant problems in 11 of the 15 RSM audits selected, for a dubious deficiency rate of 73%.
The other day, the newly branded PCAOB released its 2018 inspection report for RSM. Did auditors at the House of Adams get redemption or are they still horrible at auditing?
Let’s find out!
The state of audit quality in the U.S. is pretty poor when we’re commending auditors for only screwing up 29% of audits inspected by the PCAOB, but at least RSM auditors showed improvement during this last inspection cycle.
The majority of mistakes found by inspectors focused on internal controls, particularly auditors failing to:
- Perform substantive procedures to obtain sufficient evidence as a result of overreliance on controls;
- Sufficiently test the design or operating effectiveness of certain controls;
- Identify and test controls over the accuracy and completeness of data or reports; and
- Identify and test any controls related to a significant account or relevant assertion.
Across the five deficient audits, inspectors called out 19 separate mistakes of auditing standards pertaining to the internal control audit, four screw-ups in audit sampling, and three deficiencies each in using the work of a specialist, responding to risks of material misstatement, and auditing fair value measurements and disclosures.
Now that the 2018 inspection reports for each of the top seven public accounting firms in the U.S. have been released by the PCAOB, let’s see who had the lowest and highest failure rates:
