The Public Company Accounting Oversight Board issued the latest inspection report of Big Four firm Deloitte & Touche, noting problems with nine audits performed by the firm last year.With two unidentified clients, the PCAOB said that Deloitte failed to identify a departure from generally accepted accounting principles that it should have addressed before issuing its audit report. In both cases, the clients incorrectly concluded that interest rate swaps qualified for hedge accounting using the short-cut method in Statement of Financial Accounting Standards No. 133.
One of those clients also had income tax net operating loss carry-forwards for which there was no valuation allowance, and Deloitte failed to evaluate the reasonableness of some significant assumptions made by the client in its forecast of taxable income during the carry-forward period. With another client, Deloitte failed to perform sufficient procedures to assess the valuation of certain of the issuer’s privately issued mortgage-backed security holdings.
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