A CASE STUDY ON THE FIRST PCAOB INSPECTION REPORT ISSUED TO A BIG-4 FIRM THAT INCLUDED PUBLIC DISCLOSURE OF THE FIRM'S QUALITY CONTROL CRITICISMS―DELOITTE & TOUCHE LLP

Abstract

Section 104 of the Sarbanes-Oxley Act (2002) requires the PCAOB to conduct inspections and report on each registered accounting firm. Inspection reports may contain nonpublic content of potential defects in a firm's system of quality control. If any defect is not cured within 12 months, the portion of the report discussing the criticism is made publicly available. Until October 2011, such disclosures had only been made public about triennial firms. The purpose of this case study is to evaluate and assess the effects of the publication of the nonpublic portions of the first PCAOB inspection report issued to a Big-4 firm that included uncured quality control defects, thereby resulting in public disclosure—the 2007 inspection of Deloitte & Touche LLP.