The US accounting regulator, Public Company Accounting Oversight Board (PCAOB), has released the 2012 inspection report on Ernst & Young (EY)suggesting the New York-based firm has so far failed to do enough to address quality control issues which were identified during earlier inspections by the US regulator.

The PCAOB reviewed 51 audits performed by the firm, plus its work on another engagement where it played a role but was not the principal auditor. The PCAOB said its inspection team identified audit deficiencies at half of those audits, affecting 25 of EY's audit clients. These largely centred on the firm's apparent failure, at the time it issued its audit report, to obtain sufficient appropriate audit evidence to support its audit opinion on the financial statements and/or on the effectiveness of internal control over financial reporting.

The findings follow the publication of an expanded report of PCAOB's 2009 inspections, which also identified similar issues. In its response, EY said most of the findings in both reports related to internal controls over financial reporting (ICFR), which PCAOB has identified as a concern across the profession.

In a statement, EY said: 'Our firm has been taking substantial and specific steps to continue to improve ICFR auditing. These efforts continue and include additional guidance related to the evaluation of the design and testing of controls, new or revised templates and audit forms, mandatory training for all audit professionals, enhanced quality reviews, and reinforcing the importance of this aspect of our work.'

PCAOB's most recent inspection report for Deloitte & Touche showed the rate of deficient audits at the firm had dropped from 42% to 25% since the previous year. Its reports on PwC and KPMG are expected later this year.