PCAOB Report Says PwC Failed to Remedy Audit Shortcomings
By Anne Rosivach and Frank Byrt
- In four audits, deficiencies were found in PwC's testing of the fair values of investment securities and/or derivatives, which means PwC failed to obtain sufficient competent evidential matter to support its audit opinion.
- In another audit, PwC failed to sufficiently test certain assumptions and key inputs used to develop a significant portion of a client's loan loss allowance.
- One client had numerous foreign locations, which accounted for over 20 percent of the client's revenue. PwC did not visit any of the foreign locations in connection with the audit, nor did it use the work of its international affiliates or other auditors in reporting on the client's financial statements in the year under audit.
- In another audit, PwC obtained a schedule from the client that indicated that the carrying amount of one of its reporting units significantly exceeded its fair value. There was no evidence in the audit documentation, and no persuasive other evidence, that PwC had performed procedures, beyond inquiries of management, to address the client's assertions that the fair value indicated in the schedule was not relevant and that no impairment had occurred
- One issuer prepared cash flow projections to use in a fair value determination for purposes of its annual goodwill impairment test. The gross profit margin in the third year of the client's projections was significantly higher than the actual gross profit margin achieved by the client in any of the most recent five years, and this higher margin had the effect of substantially increasing the fair value used in the impairment test. PwC accepted the higher gross profit margin without evaluating whether it was reasonable in light of the issuer's past experience.
PwC further commented, "We are one of the world's largest audit practices and a leader in the profession, and we are committed to maintaining our leading role in promoting further improvements in auditing and financial reporting and delivering the highest quality audits in the profession. We look forward to continuing our dialogue with the board in support of our commitment to audit quality."
- Access  the Report on 2008 Inspection of PricewaterhouseCoopers LLP (March 25, 2009).
- Access  the Report on 2009 Inspection of PricewaterhouseCoopers LLP (August 12, 2010).
- PCAOB Gives Audit Firms a Mixed Review 
- CAQ Statement on PCAOB Report, ICFR Inspection Findings