PCAOB released its 2019 inspection report for EY in FY 2020. Of the 60 audits reviewed, Part I.A deficiencies were identified in 11 of them (a deficiency rate of 18%). For 2018 and 2017, EY’s deficiency rate were 26% and 31% respectively.
| Year | 2019 | 2018 | 2017 |
| Total audits reviewed | 60 | 54 | 55 |
| Audits with Part I.A deficiencies | 11 | 14 | 17 |
| Deficiency rate % | 18% | 26% | 31% |
Part I.A deficiencies
Part I.A deficiencies break-down
| Year | 2019 | 2018 | 2017 |
| Both financial statement and ICFR audits | 5 | 10 | 15 |
| Financial statement only | 4 | 1 | 1 |
| ICFR audit only | 2 | 3 | 1 |
| 11 | 14 | 17 |
Deficiencies in financial statement audit include failure to perform sufficient testing related to an account, failure to obtain accuracy and completeness of data used in substantive testing, and failure to evaluate data and assumptions in developing an estimate. Deficiencies in ICFR audit include nonidentification of controls related to significant account, nontesting of design and operating effectiveness of controls, and failure to test the accuracy and completeness of data used in controls.
Following are the audit areas with frequent Part I.A deficiencies. These are also some of the audit areas most frequently reviewed.
| Audit area | 2019 | 2018 | 2017 |
| Revenue and related accounts | 7 | 4 | 8 |
| Investment securities | 1 | 2 | 3 |
| Business combinations | 2 | 6 | 3 |
| Long-lived assets | 2 | 1 | 0 |
| Allowance for loan losses | 1 | 3 | 0 |
Improvements noted in auditing Business Combinations.
Looking at the break-up by Industry sector, 12 audits were reviewed from the Financial services sector with deficiencies identified in 1 of them (0.08%!). Most of audits reviewed were within the $100 million to $500 million revenue range (11 of them). 3 issuer with revenues exceeding $50 billion were reviewed with 1 deficiency identified.
Part I.B deficiencies
Following Part I.B deficiencies were identified:
| Non-Compliance | Reviewed | Deficiency |
| AS 1205, Part of the Audit Performed by Other Independent Auditors | 14 | 2 |
| AS 2201, An Audit of Internal Control Over Financial Reporting That Is Integrated with An Audit of Financial Statements | 18 | 1 |
| PCAOB Rule 3211, Auditor Reporting of Certain Audit Participants | 13 | 1 |
| PCAOB Rule 3524, Audit Committee Pre-approval of Certain Tax Services | 10 | 1 |
Looking at EY actions to these deficiencies, its noted, “In connection with our 2019 inspection procedures for two audits, the issuers revised their reports on ICFR, and the firm revised its opinions on the effectiveness of the issuer’s ICFR to express adverse opinions and reissued its reports.“
Overall, improvement by EY!!
