PCAOB Raps PwC in Rare Public Reprimand

The Public Company Accounting Oversight Board (PCAOB) has criticized PricewaterhouseCoopers for failing to quickly address quality control problems in some 2007 and 2008 audits. PCAOB said Thursday that the Big Four firm did not go far enough in its supervision and review of audit work.

According to PCAOB, auditors did not challenge the statements of corporate managers and sometimes took them at their word when questions arose in parts of the auditing process. Also in complex accounting areas, such as fair value, auditors failed to question management assertions even though they did not match up with historical results or other evidence in audit documents, Reuters reported. In addition, PCAOB criticized PwC for not showing enough “professional skepticism” toward possible management bias.

Only once before has the PCAOB made public a report criticizing quality controls at a Big Four audit firm, Reuters reported, noting that in 2011 the watchdog pointed out flaws in audit quality systems at Deloitte & Touche.

PwC said it is improving audit tools and training in response to the concerns. The firm commented in a statement attached to the report, which is not considered a disciplinary sanction.

A March 7 internal memo to partners, obtained by Reuters and signed by PwC Chairman Robert Moritz, defended the firm’s efforts to improve quality controls. The PCAOB’s criticisms “relate to some of the most complex, broad, judgmental and evolving areas of auditing,” the memo said.