In a major shift of its normal timetable, the Public Company Accounting Oversight Board issued its 2006 inspection report for Ernst & Young this week.

The board has been criticized over how slowly it has been issuing reports. In fact, its 2005 report on E&Y was just issued in January of this year.

In the most recent report, the board said that the Big Four firm appeared to have signed off on some audits without having sufficient evidence to support its opinions -- in one case, the firm didn't identify a client's departure from GAAP in regard to lease accounting, and in another, the board disagreed with an auditor's handling of the client's self-insurance reserve and severance payments to former executives.

Overall, the board cited problems in eight of the Ernst & Young audits it reviewed, compared to the 10 audits it cited in 2005.

In its April 5 response letter to the PCAOB, Ernst & Young said that it had supplemented its work papers and performed additional procedures for some clients in response to the findings. The firm also noted that, “In no instance did these actions change our original audit conclusions or affect our reports on the issuers' financial statements.”

The PCAOB’s full report is available at www.pcaobus.org/Inspections/Public_Reports/2007/Ernst_and_Young2006.pdf.

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