Initial reviews of the nation's largest accounting firms have turned up numerous rule violations and shoddy recordkeeping practices, as regulators embarked on a new effort to regularly examine auditors' work.

The inspections mark the first independent scrutiny of the so-called Big Four firms, which had previously operated under more than 70 years of self rule. Congress mandated the examinations in a 2002 law designed to clean up the troubled accounting industry. Accountants' lax reviews and overly cozy relationships with clients have been blamed for fueling corporate scandals that wiped out billions in investments in the past few years.

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The most oft-cited problem in the reports relates to how public companies treat credit agreements on their books. Inspectors said that across each of the four firms, auditors mistakenly allowed some client companies to classify certain debts as long-term rather than as current liabilities.

That "serious error" helps companies understate their current obligations and overstate the amount of their working capital, according to George H. Diacont, the accounting board's director of registration and inspections. Twenty companies restated their financial statements based on debt issues the inspectors found.

Inspectors also cited all four audit firms for faulty recordkeeping practices, which can make it difficult to determine how stringently the auditors checked such basic things as cash reserves and inventory.