The Public Company Accounting Oversight Board (PCAOB) has published its report on the inspection of BDO USA. In nine of the 23 audits reviewed, deficiencies were of such significance that it appeared to the inspection team that the firm, at the time it issued its audit report, had not obtained sufficient appropriate audit evidence to support its opinion.
However, the PCAOB warned against using the number of audits with deficiencies to draw any conclusions about the frequency of deficiencies throughout the firm's practice overall. The PCAOB said: “The audits to be reviewed are most often selected based on perceived risk and not through a process designed to identify a representative sample that could be extrapolated to the firm’s entire practice.”
The PCAOB inspection team also assessed BDO USA's system of quality control related to issuer audits but, as is its common practice, noted that any criticisms or discussions of defects or potential defects in that system will remain private unless the firm fails to address them within 12 months after the issuance of the report.
The most frequently identified issue was a failure to sufficiently test the design and/or operating effectiveness of controls that the firm selected for testing (seven audits), followed by failure to sufficiently evaluate significant assumptions or data that the issuer used in developing an estimate (five audits).
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