charnele n. brown michelle chalco julie chiang grace justino georgette lewis irina navasardian...

Charnele N.

Brown

Michelle Chalco

Julie Chiang

Grace Justino

Georgette Lewis

Ir ina Navasardian

ANALYSIS OF

PCAOB’S 2012 INSPECTION REPORT

PricewaterhouseCoopers

• PwC was formed in 1998• Client services • PwC serves 26 different industries • Goldman Sachs, American Express, Ford, Walt

Disney, and Nike

A GLANCE AT PwC

• The inspection team• Locations where field work was performed:• The Firm’s National Office• 29 of its approximately 66 U.S. practice offices

INSPECTION REPORTDETAILS

FINDING 1

• PwC did not test accuracy and completeness of acquiree’s historical data used in determining the fair value of a large portion of the acquired intangible assets and  property and equipment.

FINDING 1

• GAAP: Full Disclosure Principle and Cost Principle• Accounts, transactions, balances: acquiring

intangible assets• Assertions: Completeness and Valuation

FINDING 1

• GAAS: AU 328 — Historical Data of Assets• Substantive Testing — Recalculation• Corroboration — Inspection and Confirmation

FINDING 2

• The evaluation of the reasonableness of certain assumptions used in determining fair values of acquired assets did not past inquiry of management and the inquiry of issuer’s specialist.

FINDING 2

• GAAP: Relevance, reliability, consistency• Accounts, transactions, balances: acquiring

assets• Assertions: Valuation

FINDING 2

• GAAS: AU 328 — Assumptions of Fair Value• Substantive Testing — Reperformance and

Recalculation• Corroboration — Inspection and Confirmation

FINDING 3

• Inquiry and comparison of discount rate used in certain acquisitions to the weighted average cost of capital goodwill impairment analysis were the only procedures used evaluate the discount rate.

FINDING 3

• GAAP: Accounting for Estimates• Accounts, transactions, balances: Goodwill

Impairment • Assertions: Valuation

FINDING 3

• GAAS: AU 328 — Discount Rate • Discount Rate — Reperformance• Goodwill Impairment Analysis — Reperformance• Corroboration via auditor-developed model —

Recalculation

FINDING 4

• For one significant customer process of recognizing majority of revenue was different than other customers: PwC failed to identify and test the controls over occurrence of revenue from the significant customer.

FINDING 4

• GAAP: Consistency Principle and Materiality Principle

• Accounts, transactions, balances: Revenue• Assertions: Existence, Presentation and Disclosure

FINDING 4

• GAAS: AS 5 • Test of Controls — Existence/Occurrence of Revenue• Design Effectiveness• Operating Effectiveness

CLOSING

• 4 Audit Failures• GAAP Violations• GAAS Violations• What did we learn?