RSS feedsBDO Seidman's audits have been slammed by the US audit watchdog for a lack of audit documentation, inadequate auditing of goodwill impairment.
In a report by the Public Company Accounting Oversight Board, the firm was criticised over the weaknesses in its audits.
According to the report, in one company's business unit - which had had experienced historical operating losses and the loss of key customers - there was no evidence in the audit documentation, and no persuasive other evidence, that the firm had tested the issuer's revenue forecasts (including assumed new business) or evaluated the revenue multiple used to value the unit. For another business unit, there was no evidence in the audit documentation, and no persuasive other evidence, that the Firm had tested the issuer's revenue growth assumptions.
In a separate audit, the firm failed to adequately audit the valuation of the inventory of the company, which was a retailer.
'The issuer performed a reasonableness test of the valuation of its lending inventory by computing an important ratio (historical cost to retail value) using aggregated company-wide data, and the Firm used that reasonableness test as its primary substantive test of inventory valuation. However, the Firm did not investigate a significant difference between the ratio computed using aggregate data and the ratio computed using store-level data. In addition, where significant unexpected differences between the ratio computed using aggregate data and the ratio for individual stores were identified, the Firm's procedures were limited to inquiry of management and did not include obtaining corroboration of management's explanations,' the report stated.
In a written response the firm said it recongised the importance and value of the inspection process and cooperated with the inspection team to the fullest extent.
'We did this with the understanding that, while there were, at times, what we considered to be reasonable differing views between the inspection team and the firm as to audit approaches, accounting decisions, or materiality, as would be expected based on the judgmental nature of such matters, consideration of different views is a useful means of promoting best practices.
'The draft Report does appropriately recognize that the inspection process is designed to identify deficiencies and that, based on the limited selection of audits inspected, findings are not necessarily reflective of a firm’s practice in general. As such, the format of the draft Report produced by this process does not lend itself to a portrayal of the overall high quality of our audit practice. Further, the design of the draft Report provides condensed information regarding the findings, so there is no description of the procedures that were performed in the applicable areas at the time of the audits or other information that may provide additional context for understanding the nature or magnitude of the findings,' the firm stated.
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