Deloitte & Touche LLP repeatedly failed to supportassumptions in audits examined in a 2007 inspection, the PublicCompany Accounting Oversight Board said in the first public reportof unresolved deficiencies involving one of the so-called Big Fouraccounting firms.

The firm's quality controls and independence systems give “causefor concern,” the PCAOB said in its report, which was releasedtoday. The Washington-based nonprofit, created in 2002 to overseeaudits of public companies after the collapses of Enron Corp. andWorldCom Inc., gives audit firms at least a year to fixdeficiencies and only releases the reports in cases where auditorsfail to make sufficient improvements.

“These deficiencies may result, in part, from a Firm culturethat allows, or tolerates, audit approaches that do notconsistently emphasize the need for an appropriate level ofcritical analysis,” the PCAOB said in the Deloitte report, whichdidn't name the clients involved in the cited audits.

The PCAOB in 2007 looked at Deloitte's practices throughinspections at the company's New York headquarters and 18 otheroffices. The report made public today lays out instances in whichthe firm insufficiently weighed clients' valuation of assets andincome-tax assumptions. The watchdog also faulted Deloitte'sindependence procedures, saying it “has no formal system in placeto monitor the services its foreign affiliates actuallyperform.”

“In our drive for continuous improvement, we have been making aseries of investments focused on strengthening and improving ourpractice,” Deloitte Chief Executive Officer Joe Echevarria said ina statement. Echevarria, who has been with the firm since 1978, waselected to the top job in April.

The disclosure isn't a disciplinary action, said ColleenBrennan, a PCAOB spokeswoman. Dozens of smaller registered publicaccounting firms have had similar criticisms made public and haveretained their registration, she said.

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