Big Four auditors missed accounting problems

The world's Big Four auditors have missed accounting problems in their clients allowing financial results to be distorted, a US watchdog says.

The Public Company Accounting Oversight Board was set up to improve auditing following scandals at firms such as Enron and Worldcom. Its review of 2003 audits by the four found cases where debt was mislabelled or auditing problems missed.

But its chairman said the the review was not a "broad negative assessment", informs BBC News.

According to the Seattle Times, the inspections "identified significant audit and accounting issues that were missed by the firms and identified concerns about significant aspects of each firm's quality controls systems," the board said in a statement. Its chairman, William McDonough, said the "criticisms do not reflect any broad negative assessment of the firms' audit practices. ... None of our findings has shaken our belief that these firms are capable of the highest-quality auditing."

In most cases, the problems discovered weren't serious enough to prompt a restatement of company earnings, board officials said.

However, for 20 companies, a problem involving classification of company debt did lead to restatements.

The chief accountant of the Securities and Exchange Commission, Donald Nicolaisen, said he was disappointed with the inspections' findings. However, he noted, "It is important to keep in mind that this is the first inspection which covers a period during which the firms were undergoing significant change."

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