Tuesday, July 14, 2009

PCAOB Continues Sadistic Treatment of Accounting Firms' Audits

Since none of you decided to spend your weekend reading and reporting on the PCAOB inspection reports on Grant Thornton and BDO, we had rely on CFO to give us the gory details.

We'll give you the skinny on G to the T first and we'll hit BDO later.

Deficiencies highlighted in the inspection report on Grant Thornton, meanwhile, included failures to "identify or appropriately address errors" in clients' application of GAAP. In addition, inadequacies were said to have been found with respect to performing necessary audit procedures, or lacking adequate evidence to support audit opinions.
Tramp Interpretation: With regard to "identify or appropriately address errors", it appears that GT doesn't know their GAAP or they haven't found any effective passive-aggressive methods of informing their clients that they don't know how to apply GAAP.

Regarding "inadequacies...performing necessary audit procedures or lacking adequate evidence to support audit opinions": staff on the engagement didn't understand what they were supposed to do, or they attempted to do something and did it half-assed. Managers and partners on the engagement were apparently okay with that.

Grant Thornton responded to the report with a written response that included the following:
"While we believe that the PCAOB should continue to challenge judgments and documentation during the inspection process, we do not believe that, in the end, reasonable judgments should be criticized and second guessed. Such a process will ultimately lead to inefficient audits due to the fear of unnecessary criticism."
Tramp Interpretation: We are much smarter than you. We are very sensitive and don't like being questioned. This oversight business isn't really for us. We suggest that it be done away with.
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