Grant Thornton Surprises Everyone By Not Sucking at Auditing

Shocked monkeys

Grant Thornton gets a bad rap around here, much of which is kinda justified to be fair. They’re sort of like your annoying little brother who always wants to come with you to hang out with your friends but he smells like curdled milk and always has crusty gunk on the corners of his mouth.

Only a few short years ago GT had the honor of receiving the worst ever audit failure rate handed out by the PCAOB at 65%. It seems, however, while their Big 4 counterparts have marginally improved (KPMG aside, natch, not like they count as Big 4 anyway), the Purple Rose of Chicago has managed a feat we believed up until now to be impossible: a record low failure rate.

In its most recent inspection report dated March 21, 2019, the PCAOB inspected 34 audits in 2017 (meaning these were audits conducted in 2016) and found only six deficiencies. SIX. That gives GT a spectacular 18% deficiency rate which may not seem that impressive until you realize that it’s the first sub-20 deficiency rate from any major firm since 2009.

As with every other firm, GT struggled most with controls testing. The PCAOB identified three major issues that seemed most baffling to GT auditors:

  • Failure to sufficiently test the design and/or operating effectiveness of controls that included a review element and that the firm selected for testing.
  • Failure to sufficiently evaluate the issuer’s compliance with GAAP for one or more transactions or accounts.
  • Failure to appropriately evaluate control deficiencies.

Now, there are two obvious ways we can interpret this news:

  1. Grant Thornton should be commended for efforts to improve audit quality and seeing those efforts all the way through to the satisfaction of the PCAOB; or
  2. Other firms should be absolutely humiliated that a crusty-mouthed, cheese-smelling firm like GT is making them look bad by boasting one of the best deficiency rates we’ve seen in a decade.

You decide how you want to take it.

“Quality is the firm’s highest priority and is the foundation of all that we do at Grant Thornton,” wrote CEO Mike McGuire and National Managing Partner of Audit Services Jeffrey Burgess in a statement. “We continue to seek new ways to further advance high audit quality, including our newly created Audit Quality Advisory Council. The Quality Council, which includes two outside members, will advise our Partnership Board and leadership on the firm’s audit quality, and provide independent perspective on our unwavering focus on quality.”

Go ahead and do a victory lap at the Chicago mothership, GT, you’ve earned it.

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