The Public Company Accounting Oversight Board has released a report summarizing its inspection findings between 2004 and 2007 of eight of the largest domestic accounting firms, outlining the many problems it has found with their audits.

The report describes deficiencies the PCAOB observed in areas that are fundamental to any audit, such as testing of revenue, as well as areas that pose increasingly challenging issues in current market conditions, such as testing of fair value measurements. However, the report does not list any of the firms by name.

Other deficiencies described in the report include identifying departures from generally accepted accounting principles; auditing of management's estimates, income taxes, and internal control; performing analytical procedures and audit sampling; using the work of specialists; and assessing materiality, audit scope and audit differences. 

The report also includes information on changes in the quality control systems that firms have described in the remediation plans they submitted in response to the first years of inspection reports. These include changes to their structure, partner evaluation processes, internal inspection programs, procedures for using the work of foreign affiliates, and processes for compliance with independence requirements. 

"The board's focus on improvements in the firms' audits and quality control systems is critical to our mission to protect investors," said PCAOB Chairman Mark W. Olson (pictured). "This report describes areas where we have found problems, and notes steps the firms have undertaken in response to certain quality control criticisms."

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