More evidence of the mounting pressures on auditors, issuers, and valuation professionals in the context of intangible assets: Per its Sarbanes-Oxley (2002) mandate, the Public Company Accounting Oversight Board just issued its 2006 inspection of KPMG LLP, including a selected review of “the Firm’s” audits of at least seven issuers of financial statements. Included among its July 26, 2007 findings:
Issuer C The issuer used the work of a valuation specialist to determine the fair value of certain assets acquired in a significant business combination. The fair value of these assets as determined by the specialist was approximately 18 percent less than their historical book value. The Firm did not perform procedures to test whether certain data the issuer provided to the valuation specialist were complete, accurate, and relevant. Similarly, the issuer used the valuation specialist to assist in its annual impairment test related to goodwill, and the Firm failed to test whether certain data the issuer provided to the valuation specialist were complete, accurate, and relevant.
The report also includes KPMG’s response (“We have addressed the engagement-specific findings identified in the Report in a manner consistent with PCAOB auditing standards and KPMG policies and procedures and, as previously communicated to the PCAOB staff…”) Note: A “substantial portion” of the Board's criticisms of any auditor and its subsequent dialogue with the firm occurs out of public view, unless the firm fails to make satisfactory within twelve months of the report. For the complete report, response by KPMG, and archive of all PCAOB inspection reports, click here.
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