On October 17, 2011, the Public Company Accounting Oversight Board issued a statement saying audits should protect investors. “The board therefore takes very seriously the importance of firms making sufficient progress on quality control issues identified in an inspection report in the 12 months following the report,” the statement said. Not having seen such progress at Deloitte, the board made its 2008 report on the firm public. The report “cited problems in 27 of the 61 Deloitte audits it reviewed, including three where the issuing company was forced to restate its financial statements.” This was “an unprecedented rebuke to a major accounting firm. In too many instances,” the report stated, inspectors from the board “observed that the engagements team’s support for significant areas of the audit consisted of management’s views or the results of inquiries of management.” In some cases, “Deloitte auditors did not bother to even consider whether accounting decisions made by companies were consistent with accounting rules. Instead, auditors accepted management assertions that the accounting was proper, the board’s report said.”[1] As a very young auditor at that firm, I was told to do just that.
The full essay is at "Deloitte: A Culture of Least Resistance" in Institutional Conflicts of Interest, which is available at Amazon.
1. I took the quotes for this paragraph from: Floyd Norris, “Accounting Board Criticizes Deloitte’s AuditingSystem,” The New York Times, October 17, 2011; and Floyd Norris, “Audit Flaws Revealed, AtLong Last,” The New York Times, October 21, 2011