Au­dit­ing firm Price­wa­ter­house­C­oop­ers (PwC) which has been crit­i­cised for its fail­ure to de­tect prob­lems pri­or to the col­lapse of the Cli­co busi­ness em­pire, is al­so be­ing crit­i­cised by the reg­u­la­tor for Amer­i­can au­dit­ing firms which said it had found se­ri­ous prob­lems with pro­ce­dures at PWC and that the firm had failed to rem­e­dy them.

The New York Times re­port­ed that the sting­ing re­buke came from the Pub­lic Com­pa­ny Ac­count­ing Over­sight Board, which said there were rea­sons to doubt Price­wa­ter­house­C­oop­ers did ad­e­quate au­dits in 2008 and 2009."Some de­fi­cien­cies re­port­ed by the in­spec­tion team do sug­gest that the firm's sys­tem of qual­i­ty con­trol may in some re­spects fail to pro­vide suf­fi­cient as­sur­ance that the firm's au­dit work will meet ap­plic­a­ble stan­dards and re­quire­ments," the board said in a re­port that was writ­ten in 2010 and re­leased last week.

In a 2009 re­port, al­so re­leased last week, the board con­clud­ed that au­di­tors "may not be ap­ply­ing an ap­pro­pri­ate lev­el of pro­fes­sion­al skep­ti­cism in sub­jec­tive ar­eas sus­cep­ti­ble to man­age­ment bias."The com­pa­ny said in a state­ment that the board's crit­i­cisms "re­late to some of the most com­plex, judg­men­tal and evolv­ing ar­eas of au­dit­ing" and said it was com­mit­ted to im­prov­ing its work.

"We take au­dit qual­i­ty very se­ri­ous­ly," Tim Ryan, Unit­ed States as­sur­ance leader and a vice chair­man of the firm, said in an in­ter­view. "While we took sig­nif­i­cant ac­tions" to re­spond to the con­cerns, he added, "the con­clu­sion of the PCAOB was that they were not sig­nif­i­cant enough."The board in­spects au­dits of ma­jor firms every year, and re­leas­es a pub­lic re­port de­tail­ing prob­lems that were found in var­i­ous au­dits its in­spec­tors re­viewed, al­though it does not name the com­pa­nies.

The board, un­der the chair­man­ship of James R Doty, has voiced frus­tra­tion about what it sees as con­tin­ued prob­lems with au­dits, and the de­ci­sion to re­lease the re­ports may be an­oth­er in­di­ca­tion of that frus­tra­tion.

"In­spec­tors have iden­ti­fied se­ri­ous au­dit de­fi­cien­cies of such a range that it is not pos­si­ble to as­cribe them to iso­lat­ed tech­ni­cal weak­ness­es," Doty said in a speech late last year. "These in­clude in­stances where au­di­tors did not ap­proach some as­pect of their au­dit work with the re­quired in­de­pen­dence, ob­jec­tiv­i­ty and pro­fes­sion­al skep­ti­cism."

He point­ed to a re­port, is­sued by a Cana­di­an reg­u­la­tor, that looked at au­dit firm in­spec­tion re­sults from Cana­da, Britain, the Unit­ed States and Aus­tralia and con­clud­ed that the most com­mon prob­lem found was that "au­di­tors are too of­ten ac­cept­ing or at­tempt­ing to val­i­date man­age­ment ev­i­dence and rep­re­sen­ta­tions with­out suf­fi­cient chal­lenge and in­de­pen­dent cor­rob­o­ra­tion."

A lack of re­view of man­age­ment es­ti­mates was one of three prob­lems the board cit­ed at Price­wa­ter­house­C­oop­ers. The sec­ond con­cerned the firm's au­dits of de­ci­sions re­gard­ing the val­ue of good will.The third area was in re­view­ing a com­pa­ny's in­ter­nal con­trols. In some cas­es, the board said, the firm sim­ply re­lied on re­ports by a client's in­ter­nal au­di­tors, and did so even af­ter dis­cov­er­ing prob­lems with the in­ter­nal au­di­tor's work.