The latest inspection reports on KPMG and PwC from the US regulator, the Public Company Accounting Oversight Board (PCAOB), have revealed deficiencies in audits carried out by both firms.

The PCAOB reviewed aspects of 48 audits performed by KPMG, identifying problems with 17 of these. It also highlighted deficiencies in the firm's performance on two other engagements where it played a role but was not the principal auditor.

Problems identified included failure to obtain sufficient audit evidence to support the audit opinion on financial statements once the issuer announced an intention to restate after the primary inspection procedures. In another case, KPMG identified numerous control deficiencies on an audit but failed to evaluate whether these resulted in material weakness when considered collectively, or to test revenue recognition once a fraud risk had come to light.

In a statement, a US spokesman for KPMG said the PCAOB inspection process had helped the firm improve audit quality, and that KPMG is 'committed to continually improving our firm and to working constructively with the PCAOB to improve audit quality.'

In the case of PwC, the PCAOB found problems with 21 of the 52 audits it reviewed. These included work with a client where the process for recording revenue transactions and deferred revenue involved several computer systems and multiple transfers of data. The PCAOB says PwC failed to identify and test any controls over the accuracy and completeness of several of these data transfers, and its review of the data transferred was not sufficient to determine whether the controls would prevent errors from occurring.

In a statement, PwC said; 'while we may disagree with the significance of inspection observations in certain cases, we have taken all of the board's observations into account in formulating our plan to continuously improve audit quality.'