PCAOB released its 2019 inspection report for Deloitte in FY20. Of the 58 audits reviewed, Part I.A deficiencies were identified in 6 of them (a deficiency rate of 10%!!). For 2018 and 2017, Deloitte’s deficiency rate were 12% and 20% respectively. I guess there is no scope for improvement here :). This is the lowest deficiency rate seen to date! (Looking forward to the PwC inspection report for next year. Rumor is its less than 1%).

Part I.A deficiencies

Part I.A deficiencies break-down

Financial statement audit deficiencies include failure to perform sufficient testing related to an account, failure to obtain sufficient evidence due to overreliance on controls, and failure to evaluate data and assumptions in developing an estimate. Deficiencies in ICFR audit include nonidentification of controls related to significant account and non-testing of design and operating effectiveness of controls. No deficiencies were identified with respect to the completeness and accuracy of the data used for controls.

Following are the audit areas with frequent Part I.A deficiencies. These are also some of the audit areas most frequently reviewed.

Improvements noted in auditing Insurance-related assets & liabilities and revenue accounts.

Looking at the break-up by Industry sector, 12 audits were reviewed from the Information Technology sector with deficiencies identified in 1 of them (0.08%!). Most of audits reviewed were within the $1 billion to $2.5 billion revenue range (11 of them). 4 issuers with revenues exceeding $50 billion were reviewed with no deficiency identified in them.

Part I.B deficiencies

Deloitte keeps improving each year. Looking forward to the next year where we might have a 0% deficiency! maybe!