Ernst Audits Found Deficient
Michael Rapoport, Wall St Journal
The government's auditing-oversight board found deficiencies in 13 audits conducted by Ernst & Young LLP in its annual inspection of the Big Four accounting firm.
In a report released Thursday, the Public Company Accounting Oversight Board said some of the deficiencies it identified in its 2010 inspection were significant enough that it appeared Ernst & Young hadn't obtained enough evidence to support its audit opinions.
The 13 deficient audits were out of 63 Ernst & Young audits and partial audits that inspectors reviewed. The board didn't identify the companies involved, in accordance with its usual practice.
In seven of the 13 audits, the oversight board said Ernst & Young was deficient in its testing of how clients applied fair value to their hard-to-value securities. The accounting board also said that in various audits, the firm made incorrect assumptions that led to inadequate testing of clients' internal controls, and didn't do enough testing on matters like revenue and loan-loss reserves.
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