PCAOB Sees Audit Deficiency Rate Fall to 23% as Firms Tighten Training and Oversight

Audit quality at U.S. accounting firms improved in 2025, with the share of engagements containing Part I.A deficiencies falling to an estimated 23% from 38% in 2024 and 46% in 2023, the Public Company Accounting Oversight Board said in a staff report summarizing its latest inspections. The findings, published on October 22 and circulated this week, cover audits of public companies and mark a third consecutive year of decline.

Part I.A deficiencies are cases in which the PCAOB concludes that a firm did not obtain sufficient appropriate audit evidence to support its opinion on a company's financial statements or on internal control over financial reporting. The board inspected 143 firms and reviewed portions of 780 company audits in 2025. The figures are estimates because some inspections have not been finalized and the related reports have not yet been published, and prior-year results can change as more reports are released.

Big Four and network firms show steep gains

The largest firms recorded the biggest improvements. At the Big Four, Deloitte & Touche LLP, Ernst & Young LLP, KPMG LLP and PricewaterhouseCoopers LLP, the deficiency rate fell to 8% in 2025 from 20% in 2024 and 26% in 2023. Individual estimated rates were 5% for Deloitte, 5% for EY, 13% for KPMG and 9% for PwC. The four firms collectively audited about 80% of the market capitalization of public companies listed on U.S. exchanges as of December 31, 2025.

Across all global network firms, a group that also includes BDO USA and Grant Thornton, the rate declined to 13% from 26% in 2024 and 34% in 2023. Non-affiliated firms inspected annually had an estimated rate of 18%, compared with 52% in 2024 and 53% in 2023, while U.S. non-affiliated firms inspected every three years recorded 32%, down from 53% in 2024 and 65% in 2023.

The board attributed the improvement to sustained efforts in quality control, stricter accountability and the use of technology. Some firms measured workloads to determine whether partners were nearing the limit of their capacity for audit engagements. Others sharpened training in revenue recognition, estimates, fraud considerations and internal control over financial reporting, with some designing courses that targeted the root causes of earlier inspection findings to prevent repeat deficiencies, the PCAOB said.

Why it matters for audit careers

The report also described how firms reviewed whether staff had the industry or subject knowledge needed for particular engagements, and how some encouraged employees to consult specialists assigned to answer complex questions. Firms appeared to be strengthening leadership accountability for audit quality, potentially in preparation for the effective date of QC 1000, a standard on a firm's system of quality control, according to the board.

For people building careers in accounting and audit, the data suggests that hiring and promotion decisions are increasingly tied to documented quality controls rather than engagement volume alone. The staff report said the board has not studied why the deficiency rate declined, but noted that its 2024 analysis pointed to more in-office work, more focused training, additional resources and improved supervision and review as likely drivers, and said those factors continued to affect quality in the 2025 cycle.

The PCAOB's chairman, Demetrios Logothetis, said the overhaul of the inspections process is critical to the board's mission as super intelligence and the digital age continue to reshape the auditing profession. The Big Four firms this month asked the Securities and Exchange Commission to approve PCAOB rule revisions that would soften quality control safeguards for audits.

What to watch next

Final inspection reports for 2025 will be published over the coming months and could shift the estimated rates. The board has said it plans to review 25 audit files in the 2026-27 financial year, selecting files where a financial report needed material correction or where other data raised concerns about possible misstatement or threats to auditor independence.