PCAOB Posts Report Detailing Significant Improvements Across Largest Firms, Alongside Inspection Results In Record Time

• The aggregate rate for the six U.S. Global Network Firms (GNF) dropped eight percentage points
• The aggregate rate for the four largest firms dropped six percentage points
• The aggregate rate for the eight annually inspected Non-Affiliated U.S. Firms (NAF) is expected to hold steady
• The aggregate rates for GNF triennially inspected firms are expected to drop nine percentage points, and NAF triennially inspected firms are expected to drop six percentage points

Inspection staff at the Public Company Accounting Oversight Board (PCAOB) expect significant improvements in aggregate deficiency rates across all categories of inspected firms in 2024, as detailed in a new PCAOB staff Spotlight publication(PDF). The PCAOB published the Spotlight, which summarizes the 2024 inspection results, along with individual inspection reports for the six U.S. GNFs.

This improvement follows focused efforts by the PCAOB under this Board to encourage firms to address their high deficiency rates coming out of the pandemic and improve audit quality for investors.

“We challenged the audit profession to do better for America’s investors, and these significant improvements demonstrate real progress in protecting investors,” said PCAOB Chair Erica Y. Williams. “Still, our work is far from over, and I urge the audit profession to build on this momentum.”

This Board has made it a priority to speed up the release of inspection results, ensuring that critical information gets into the hands of investors, market participants, and other stakeholders more quickly. Today’s six GNF reports were posted in record time, five months sooner than last year’s results, which were published six months sooner than the year before. The rest of the 2024 inspection reports have been published or will be published later this year as they are completed. The staff Spotlight reflects what staff expect to see in those inspection reports based on comment forms issued as part of the inspections process.

Key findings from the staff Spotlight include the following:

• Overall Part I.A deficiency rates: For all inspected firms, the aggregate Part I.A deficiency rate decreased to 39% in 2024, down from 46% in 2023.
• Big Four U.S. Firms: The aggregate Part I.A deficiency rate for the Big Four U.S. firms – which as of December 31, 2024, collectively audit approximately 80% of the market capitalization of public companies listed on exchanges – decreased to 20% in 2024, from 26% in 2023.
• U.S. Global Network Firms (GNF): The aggregate Part I.A deficiency rate for the six U.S. GNFs decreased to 26% in 2024, from 34% in 2023.
• U.S. Non-Affiliated Firms (NAF): Results at the eight annually inspected NAF firms held steady, decreasing to 52% in the aggregate in 2024, compared to 53% in 2023.
• Triennial Firms: Although the same firms are not inspected year-to-year, we saw improvements at the NAF and GNF triennially inspected firms. Aggregate deficiency rates at NAF triennially inspected firms decreased from 67% in 2023 to 61% in 2024, and GNF triennially inspected firms decreased from 35% in 2023 to 26% in 2024.

PCAOB Efforts to Drive Improvement in Audit Quality

Williams has repeatedly called on firms to improve audit quality since becoming Chair in 2022, and the PCAOB has engaged in focused efforts under this Board to encourage firms to address their high deficiency rates coming out of the pandemic. PCAOB initiatives detailed in today’s report include:

• Publishing a variety of information, resources, and tools to help firms improve audit quality
• Increasing transparency
• Engaging regularly with firms
• Providing focused support to smaller firms
• Publishing implementation guidance for new PCAOB standards
• Prioritizing guidance and communication regarding remediation submissions for quality control deficiencies
• Engaging directly and regularly with U.S. audit committees
• Increasing our focus on the effect of firm culture on audit quality.

Today’s 2024 results build on the ‘leveling-off’ of deficiency rates at the largest firms that PCAOB inspectors began to see last year in 2023’s inspection results.

Individual 2024 Reports Released Today

In addition to the Spotlight, the PCAOB released the following U.S. GNF 2024 inspection reports today:

• BDO USA, P.C.(PDF) 
• Deloitte & Touche LLP(PDF)
• Ernst & Young LLP(PDF)
• Grant Thornton LLP(PDF)
• KPMG LLP(PDF)
• PricewaterhouseCoopers LLP(PDF)

Investors and other stakeholders can learn more about PCAOB inspections on the PCAOB’s Inspections page. Visit the Staff Publications page on the PCAOB website to find more perspective on the PCAOB’s activities and observations.

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About the PCAOB

The PCAOB is a nonprofit corporation established by Congress to oversee the audits of public companies in order to protect investors and further the public interest in the preparation of informative, accurate, and independent audit reports. The PCAOB also oversees the audits of brokers and dealers registered with the Securities and Exchange Commission, including compliance reports filed pursuant to federal securities laws.