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?