The Public Company Accounting Oversight Board made public on Friday some previously confidential parts of its 2009 inspection report on Deloitte & Touche LLP after the firm failed to completely address several quality control issues that the PCAOB had identified within a year.
“The board has determined that as of April 16, 2010, the firm had not addressed certain criticisms in the report to the board’s satisfaction,” said the PCAOB.
Deloitte pointed out that it has since addressed many of the matters identified in the report. “We believe the PCAOB’s favorable determination concerning our remediation of the matters in Part II of our 2008 and 2010 inspection reports is reflective of the significant and measurable progress we have made in recent years toward the achievement of our audit quality objectives,” said spokesman Jonathan Gandal.
The PCAOB acknowledged that it is not unusual for an inspection report to include nonpublic criticisms of several aspects of a firm's system of quality control, and that any board judgment that results in later public disclosure is a judgment about whether the firm made sufficient effort and progress to address the particular criticisms articulated in the report on that firm in the 12 months immediately following the report date.
“It is not a broad judgment about the effectiveness of a firm’s system of quality control compared to those of other firms, and it does not signify anything about the merits of any additional efforts a firm may have made to address the criticisms after the 12-month period,” said the PCAOB.
In a statement included in the report, Deloitte LLP CEO Joe Echevarria and the chief executive of the auditing unit, Deloitte & Touche LLP CEO Greg Weaver, described several of the actions they had taken. “We hold ourselves to very high standards, and take seriously the important public interest role entrusted to us,” they wrote. “In order to continuously raise the bar on audit quality, in recent years we have made substantial, comprehensive investments in our audit practice.
Through a combination of these investments, the diligence and dedication of our partners and professionals, and constructive engagement with our regulators, we have made significant progress toward the achievement of our audit quality objectives.”
They acknowledged that the PCAOB had concluded that the actions they took prior to the April 16, 2010 remediation deadline for the 2008 inspection report were not enough to address five of the quality control criticisms, so the PCAOB had made public portions of that report.
“While we did take numerous good faith remedial actions within the 12-month period (April 2009 through April 2010) following the issuance of the 2008 report, we recognize additional remedial actions were necessary and were subsequently taken in order to be fully responsive to the matters identified in the 2008 Part II,” they said.
They added that that the PCAOB had determined that the remedial actions Deloitte took in response to the 2009 and 2010 inspection reports addressed the quality control criticisms in those reports to the board’s satisfaction.
“We believe the PCAOB’s determinations concerning our remediation of the quality control criticisms contained in Part II of our 2009 and 2010 inspection reports are reflective of the significant progress we have made toward the achievement of our audit quality objectives in more recent years,” Echevarria and Weaver wrote. “High audit quality remains our number one priority. We are experiencing a positive trajectory as demonstrated by the decline in the number of deficiencies cited in Part I of our 2012 inspection report. As we look forward, we will continue to institutionalize the audit process enhancements we have made throughout our system of quality control to ensure that they endure. We also will continually challenge ourselves to drive continuous improvement in audit quality.”
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