Accountants  News Hubb
Advertisement
  • Home
  • News
  • Accountant News
  • Contact us
No Result
View All Result
  • Home
  • News
  • Accountant News
  • Contact us
No Result
View All Result
Accountants  News Hubb
No Result
View All Result
Home Accountant News

EY’s Auditing Has Reverted Back to Being Bad, 2021 PCAOB Inspection Report Shows

admin by admin
December 31, 2022
in Accountant News


Next up on the PCAOB’s hit list is EY, whose 2021 inspection report was released on Dec. 19. The Black and Yellow had been slowly but surely not screwing up as many audits in recent years. After having a not-great audit deficient rate of 31% in its 2017 inspection report, EY’s error rate had dropped to 26% in its 2018 report, 18% in 2019, and 15.4% in 2020.

In its 2022 Transparency Report, which was released in late October, EY noted that the PCAOB would be “issuing Part I of its report on the 2021 inspection of EY US in the coming months,” but the firm provided no hints as to how well it did or what to expect. Now that its 2021 auditing report card is out, we know why EY stayed mum on its results: they weren’t very good (bold part added by us for emphasis):

In the 2021 inspection of Ernst & Young LLP, the PCAOB assessed the firm’s compliance with laws, rules, and professional standards applicable to the audits of public companies.

We selected for review 56 audits of issuers with fiscal years generally ending in 2020. For each issuer audit selected, we reviewed a portion of the audit. We also evaluated elements of the firm’s system of quality control.

We also selected for review three reviews of interim financial information (“interim reviews”). Our reviews were performed to gain a timely understanding of emerging financial reporting and auditing risks associated with issuers that were formed by mergers between non-public operating companies and special purpose acquisition companies (SPACs). We did not identify any instances of non-compliance with PCAOB standards related to the interim reviews that we reviewed.

[…]

Twelve of the 56 audits we reviewed in 2021 are included in Part I.A of this report due to the significance of the deficiencies identified. The identified deficiencies primarily related to the firm’s testing of controls over and/or substantive testing of revenue and related accounts, long-lived assets, and equity and equity-related transactions.

So for those of you scoring at home, that’s a deficiency rate of 21.4%—the firm’s worst since 2018. Nine audits had problems in both internal control over financial reporting and in the financial statement, one had deficiencies in the financial statement only, and two had deficiencies in ICFR only. The most common Part I.A deficiencies in 2021 related to testing the design or operating effectiveness of controls selected for testing, identifying controls related to a significant account or relevant assertion, and testing the accuracy and completeness of information used to make selections for testing controls, according to the PCAOB.

There were four areas of the audit that confounded EY auditors the most:

  • Revenue and related accounts: The deficiencies in 2021 (as well as in 2020 and 2019) primarily related to substantive testing of, and testing controls over, revenue, including controls over information technology systems associated with revenue.
  • Long-lived assets: The deficiencies in 2021 related to testing controls over the valuation of long-lived assets and the evaluation of misstatements related to long-lived assets.
  • Equity and equity-related transactions: The deficiencies in 2021 related to substantive testing of, and testing controls over, the appropriateness of the issuer’s accounting for certain warrants and transactions.
  • Inventory: The deficiency in 2021 related to substantive testing of, and testing controls over, inventory.

Three of EY’s 10 audits of issuers in the industrials sector were screwed up, while two of its eight audits of issuers in health care and two of its 10 audits of issuers in the consumer discretionary sector had mistakes. Errors were found in one audit each for issuers in the energy, financials, materials, and real estate sectors. EY auditors did get a 100% on their four audits of issuers in communication services, so they got that going for them.

If you’re looking for something to read over the holiday weekend, we’ve included EY’s 2021 inspection report below.

Latest Accounting Jobs–Apply Now:

Related

Have something to add to this story? Give us a shout by email, Twitter, or text/call the tipline at 202-505-8885. As always, all tips are anonymous.





Source link

Previous Post

Beware crypto billionaires boasting of audits

Next Post

Latisha Carter on How Xero Tailors Its Product to Fit User Needs

Next Post

Latisha Carter on How Xero Tailors Its Product to Fit User Needs

Recommended

Patriot Payroll, Time & HR – A Payroll & Benefits Synopsis

August 30, 2022

REMINDER: QuickBooks Desktop 2020 Sunsets May 31, 2023

May 20, 2023

Don't miss it

News

IASB amends supplier finance disclosure rules

May 28, 2023
News

Monthly Salary up to 84000, Check Posts, Age, Qualification and Application Procedure

May 28, 2023
News

Memorial Day 2023 – insightfulaccountant.com

May 28, 2023
Accountant News

AICPA Council Approves 12-Point Plan to Do F*ck All to Solve the Accountant Shortage

May 28, 2023
News

Practice Profile: TikTok boom — and busts

May 27, 2023
Accountant News

App Partner Stories: Make the most of the small business summer rush by preparing ahead of time

May 27, 2023

© Accountants News Hubb All rights reserved.

Use of these names, logos, and brands does not imply endorsement unless specified. By using this site, you agree to the Privacy Policy and Terms & Conditions.

Navigate Site

  • Home
  • News
  • Accountant News
  • Contact us

Newsletter Sign Up

No Result
View All Result
  • Home
  • News
  • Accountant News
  • Contact us

© 2022 Accountants News Hubb All rights reserved.