The Canadian Public Accountability Board flags rising audit deficiencies in revenue, deals, and inventory files
Canada’s audit watchdog found “significant” problems at all four major firms that sign off on Canadian public-company financial statements in its latest inspection of the Big Four, Financial Post reported.
According to the Canadian Public Accountability Board (CPAB), its 2025 review identified at least one “significant finding” at each of Deloitte LLP, Ernst & Young LLP, KPMG LLP and PricewaterhouseCoopers LLP.
Financial Post reported that CPAB focuses on higher-risk audit areas at more complex companies and on areas where an audit firm may have less expertise.
CPAB said a significant finding is generally a deficiency in applying auditing standards or other relevant professional standards on items that are material to the company being audited.
When CPAB identifies such a finding, the audit firm must perform additional work to support its audit opinion and could be required to make significant changes to its audit approach.
CPAB reports that in 2025, “significant findings” showed up in 16 percent of Big Four sample files, higher than the 12 percent share in 2024 and in line with 2023’s 16 percent.
In the 2025 review, CPAB’s largest single sample was 24 files from KPMG. The watchdog flagged significant findings in five of those files, or just over 20 percent.
Financial Post reported that half of these findings were in revenue and related accounts, with single issues in inventory and business combinations.
Financial Post said the inspection of last year’s work at Ernst & Young included 11 files and flagged two with significant findings in “long-lived” assets and revenue and related accounts.
At PricewaterhouseCoopers, the 2025 inspection looked at 14 files and flagged two with significant findings in business combinations and inventory.
Deloitte’s inspection last year looked at 12 files and flagged one with significant findings in business combinations.
CPAB bases the number of files it inspects on variables including the volume and size of companies audited by the firm, the relative risk of specific industries and an evaluation of how the audit firm responded to prior inspection findings.
Each year, the regulator looks at specific firms and the Canadian market as a whole when selecting files.
CPAB began identifying individual audit firms by name in its review this year to increase transparency, Financial Post reported.
The watchdog said its findings should not be extrapolated to a firm’s entire audit portfolio because its inspection process is not designed to select a representative sample of the firm’s work.
It also said inspections do not 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.
Following the annual review process, an accounting and audit firm has 180 days to submit evidence or otherwise demonstrate to CPAB that it has implemented recommendations to improve its system of quality management.
If a firm does not address weaknesses, deficiencies or recommendations to the regulator’s satisfaction, CPAB can make that fact and the relevant portions of its inspection public.
CPAB said that in this situation, the firm will be notified of its intent to publish and will have an opportunity to request a review of the decision before publication.
In response to the CPAB findings, the firms wrote letters appended to the annual reports.
KPMG chief executive Benjie Thomas and Canadian managing partner of audit Sebastian Distefano wrote that the firm has reviewed the significant findings and is addressing them in line with auditing standards and its own policies.
They said KPMG is making “substantial investments and taking important actions” to lift audit quality.
PricewaterhouseCoopers CEO Nicolas Marcoux and national assurance leader Anita McOuat said the firm has taken appropriate actions, including updates to training, policies and guidance, and enhancements to existing processes.
“We recognize that the inspection process provides a valuable opportunity to further enhance audit quality,” they wrote.
Deloitte chief executive Anthony Viel wrote that CPAB’s insights and observations were valuable in helping the firm identify areas for improvement and that the firm has started implementing targeted actions and remains committed to completing ongoing measures.
Ernst & Young chair Alycia Calvert and Zahid Fazal, managing partner of assurance services in Canada, wrote that the firm is modernizing audits by streamlining processes and giving staff access to an AI platform.
They said EY has reviewed the 2025 results and is acting on CPAB’s recommendations.
