In a bit of good news, the quality of public company audits by the largest accounting firms continues to improve, at least according to early Public Company Accounting Oversight Board (PCAOB) inspection findings.
“While our 2025 inspection procedures for the six U.S. Global Network Firms are still underway, preliminary results show a decrease in Part I.A. deficiency rates from 2024,” Acting PCAOB Chair George Botic said at a meeting of the board’s Investor Advisory Group in Washington on September 25, 2025. “This early data suggests that the efforts by these firms during the past few years are positively impacting audit quality.”
Part I.A of PCAOB inspection reports identifies deficiencies where the auditor did not obtain sufficient appropriate audit evidence to support its opinion on the company’s financial statements and internal control over financial reporting.
This is a positive development as the largest firms audit a huge portion of the market capitalization. For example, Big Four firms collectively audit about 80% of the market cap.
The six U.S. global network firms are Deloitte & Touche LLP, Ernst & Young LLP, KPMG LLP, PricewaterhouseCoopers LLP, BDO USA, P.C., and Grant Thornton LLP.
Botic told Thomson Reuters that it is too early to tell how much better than 2024, but the board is “far enough along in the process that we can say with certainty that we are anticipating the results [deficiency rates] coming down again.”
In the meantime, he said it is also too early to determine whether there will be an improvement for all firms inspected as inspections are continuing. The PCAOB inspects firms that audit more than 100 public companies annually. Firms that audit fewer than 100 are inspected once every three years.
At least for the six global network firms, the preliminary findings for 2025 inspections continue the improvements seen during the 2024 inspection.
The combined deficiency rate for the six global network firms fell by 8 percentage points, from 34% in 2023 to 26% in 2024.
The deficiency rate for Big Four firms declined to 20% in 2024, down from 26% in both 2023 and 2022. However, the aggregate deficiency rate for the Big Four in 2020 was 12%, increasing to 16% in 2021.
The improvements seen in 2024 were not limited to the largest firms.
All firms, on average, have been performing better.
After year-over-year increases in the audit regulator’s deficiency rates that culminated in Part I.A deficiency rate of 46% during the 2023 inspections cycle, the rate decreased to 39% in 2024. The deficiency rate for the 2022 inspection cycle for all firms was 40%, up from 34% in 2021, and 29% in 2020.
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