Audit watchdog flags ‘significant’ problems in Big Four’s work in review that actually names names

The Canadian Public Accountability Board reviewed the work of KPMG LLP, Deloitte LLP, Ernst & Young LLP and PricewaterhouseCoopers LLP. Photo by Tannen Maury/Bloomberg News

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Canada’s audit watchdog found “significant” problems with the work of all four major accounting firms that audit Canadian companies in an annual review that for the first time identified them by name.

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The Canadian Public Accountability Board (CPAB), which bases its inspections on higher-risk audit areas of more complex companies and areas where the audit firm may have less expertise, revealed at least one “significant finding” at each of Deloitte LLP, Ernst & Young LLP, KPMG LLP and PricewaterhouseCoopers LLP.

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In the largest single sample of 24 files at KPMG, the independent audit regulator flagged significant findings in five, or just over 20 per cent. Half of these findings were in the area of revenue and related accounts, with single issues found in the areas of inventory and business combinations.

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CPAB, which began identifying individual audit firms by name this year to increase transparency, noted that its inspection process is not designed to select a representative sample of a firm’s audit work so its findings should not be extrapolated to the firm’s entire audit portfolio.

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On the other hand, inspections don’t look at every aspect of a file, so the absence of significant findings should not be taken to mean that all aspects of the audit were fully compliant with professional standards.

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An accounting and audit firm is given 180 days to submit evidence or otherwise demonstrate to CPAB that it has implemented recommendations to improve its system of quality management.

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If a firm does not address weaknesses, deficiencies or recommendations to the satisfaction of the regulator, CPAB can make that fact and the relevant portions of their inspection public.

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“In this situation, the firm will be notified of our intent to publish and has an opportunity to request a review of this decision before publication is made,” the regulator said.

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The portion of sample files with “significant findings” at the Big Four accounting and audit firms averaged 16 per cent in 2025, higher than the 12 per cent average a year earlier but on par with the 16 per cent share of files inspected in 2023.

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The inspection of last year’s work at Ernst and Young included 11 files and flagged two with significant findings in the areas of “long-lived” assets and revenue and related accounts.

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At PricewaterhouseCoopers, the 2025 inspection looked at 14 files and flagged two with significant findings in the areas of business combinations and inventory.

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Deloitte’s inspection last year looked at 12 files and flagged one with significant findings in the area of business combinations.

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In response to the CPAB inspections, the audit firms wrote letters appended to the annual reports for each, indicating that they are committed to performing high-quality audits and take the regulator’s assessments seriously.