US audit watchdog criticises KPMG in report

KPMG failed to adequately scrutinise the accounts of nine companies, according to the US audit watchdog, accusing the Big Four firm of relying on inadequate evidence to support its opinions.

America's Public Company Accounting Oversight Board (PCAOB) accused the firm of using inadequate evidence to support its audit opinions on pension plans and securities valuations, CFO.com reported.

`The degree of reliance the firm placed on controls at certain of the business units was inappropriate in light of the control testing performed,' the PCAOB found in its report, completed earlier this month.

`At certain of the business units selected for testing, the firm failed to test certain of the issuer's assumptions.'

In response to the claims, KPMG said none of the issues identified by the PCAOB required client companies to restate their financials and that 'professional judgments' are part of the audit process as they are with the PCAOB's inspection process.

The firm went on to say that its view often diverges with the PCAOB, particularly when it came to, `the assessment of audit risk, the materiality of particular issues...resulting conclusions, and/or required documentation'.

`We conducted a thorough review of the matters identified in the draft report and addressed the engagement-specific findings,' the firm said.

The PCAOB said it relied on a sample of audits in its investigation and the identified deficiencies raised didn't necessarily apply across a broad swath of the firm's audits.

Read the full story: KPMG Should Be Tougher on Testing, PCAOB Finds

Read the PCAOB report: 2008 Inspection of KPMG LLP