KPMG had most deficiencies in audit files reviewed last year of Big Four firms, regulator finds

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Canada’s audit regulator flagged deficiencies in 20 per cent of the audit files it inspected at accounting giant KPMG LLP in 2025, the most of any major accounting firm reviewed last year.

On Wednesday, the Canadian Public Accountability Board (CPAB), which oversees the work of accounting firms that audit publicly traded companies, published its inspection reports for individual accounting firms for the first time. It is a major change in disclosure practice that lines Canada up with regulators in the United States, which release findings for individual firms.

CPAB released the findings of its inspections for Canada’s Big Four accounting firms: KPMG; Deloitte LLP; Ernst & Young LLP; and PricewaterhouseCoopers LLP.

CPAB chief executive officer Sonny Randhawa said the new reports are an important step forward in the organization’s commitment to transparency and will provide greater insight into the results of CPAB’s regulatory oversight of public accounting firms.

Until regulatory and legislative changes were introduced last year, CPAB had been prohibited from reporting which firms have the best and worst records in their annual inspections. Instead, it released summaries of its overall findings.

Wednesday’s release of individual results lines CPAB up with the U.S. regulator, the Public Company Accounting Oversight Board, which identifies firms by name in its publicly released inspection reports.

CPAB’s individual firm inspection disclosure builds on enhancements introduced in recent years, including the public disclosure of significant enforcement actions against accounting firms, recommendations that have not been completed by a firm within a set timeline, as well as requirements for firms to share issuer-specific inspection findings with public companies’ audit committees.

All public accounting firms that audit publicly traded companies must register with CPAB, and any firm that audits at least 100 public companies gets reviewed annually.

CPAB assesses each audit firm’s compliance with professional standards by reviewing a sample of client audit files.

The report identifies “significant findings” – a key performance metric where an accounting firm falls short of accepted auditing standards for a material part of a company’s financial statement. Where a significant finding is found, the firm must perform additional audit work.

Of the Big Four firms, KPMG had the highest number of identified issues found by CPAB – with six significant findings in five of the 24 audits it inspected.

The review found three infractions pertaining to audits of revenue and related accounts, while business combinations, inventory and “other” were also flagged once each.

Roula Meditskos, a spokesperson for KPMG Canada, said in an e-mail that the company takes the findings from the CPAB inspection process seriously as they help identify areas for improvement and strengthen KPMG’s system of quality management.

“Consistently executing high-quality audits is our top priority,” Ms. Meditskos said. “We are confident that the actions we are taking will result in meaningful improvement.”

In a March 2 letter sent to CPAB, KPMG Canada CEO Benjie Thomas said the company had reviewed the significant findings related to the files identified in the report and is “addressing them in a manner that is consistent with the applicable auditing standards.”

“We are also making substantial investments and taking important actions to ensure we are set up to drive sustainable quality and improvement,” he wrote.

Both Ernst & Young and PricewaterhouseCoopers had two significant findings found in two of the audits out of 11 and 14 audits CPAB inspected, respectively, while Deloitte had one significant finding found in one of the 13 audits conducted.

All three firms said they have taken appropriate actions to respond to the matters raised by CPAB.

In addition, PwC Canada CEO Nicolas Marcoux said in a letter to CPAB that the company made updates to relevant training, policies and guidance, as well as “enhancements” to its existing processes.

EY Canada chair and CEO Alycia Calvert told CPAB the company made changes to streamline and modernize its audit processes, including “enabling” staff with an AI-powered platform.

CPAB has a graduated enforcement framework and said “any recurring findings and/or more severe findings may lead to enforcement over time.“ Significant enforcement actions remain non-public until an appeal period has passed and an enforcement action is imposed and published, CPAB said in an e-mail.

A summary of published enforcement actions will be disclosed in CPAB’s annual report, which is set to be released at the end of March.

Editor’s note: A previous version of this article incorrectly stated that PricewaterhouseCoopers had 13 audits conducted. The firm had 14 audits.