The Public Company Accounting Oversight Board released a copy of its annual inspection of Grant Thornton, noting several deficiencies in the firm's audits of five clients.

With one unidentified client, the firm failed to adequately test the revenue and cost of revenue cycles, to test certain factors that the company had used in determining the fair value of the stock options that the company had issued or to perform procedures to assess whether the company had recognized compensation expense over the proper service period.

With another client, the PCAOB found that Grant Thornton auditors failed in several respects to adequately test the valuation assertion regarding inventory.

The PCAOB also said the firm failed to test the data provided to actuaries who prepared reports that the company used in accounting for benefit plans that represented approximately 90 percent of the company's total benefit obligation.

The PCAOB also faulted Grant Thornton for its evaluation of another client's goodwill impairment test and the assumptions the company used to calculate fair value. With a fourth company that was restructuring one of its units, the PCAOB said there was no evidence in the audit documentation, and no other persuasive evidence, that the firm had reviewed the company's restructuring plan and evaluated certain costs to assess whether they met the requirements for inclusion in restructuring charges, and to determine whether those costs were recorded in the appropriate period.

With a fifth client, the PCAOB found that Grant Thornton failed to test interest receivable and interest payable balances related to borrowed and loaned securities beyond comparing the amounts to reports that were not tested for completeness.

In the firm's response to the PCAOB report, Grant Thornton said that in certain cases it agreed to perform additional procedures or improve aspects of its audit documentation. "We have already developed additional guidance, updated our policies where applicable, implemented expanded monitoring in some key areas and enhanced our training programs to address topics covered by the PCAOB's comments," said the firm.

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