The Public Company Accounting Oversight Board saw continued improvement in audit quality across a broad range of inspected accounting firms in 2025, the U.S. audit regulator says in a staff report released last week.
Last year, PCAOB Division of Registration and Inspections staff inspected 143 PCAOB-registered public accounting firms and reviewed portions of 780 public company audits. Inspections primarily were related to audits of public companies with fiscal years ending in 2024 that were completed during 2025.
For all inspected firms, the aggregate Part I.A deficiency rate decreased from 38% in 2024 to 23% in 2025.
A Part I.A deficiency means the audit firm failed to obtain sufficient appropriate evidence to support its opinion on the financial statements.
“We observed sustained focus on quality control, accountability, and use of technology, among other factors, which seemed to contribute to the continued improvement reflected in the 2025 inspection results,” the PCAOB says in the report.
The following are deficiency rates by audit firm categories:
- U.S. global network firms: The aggregate Part I.A deficiency rate for the six U.S. GNFs—Deloitte & Touche, PwC, Ernst & Young, KPMG, BDO USA, and Grant Thornton—dropped from 26% in 2024 to 13% in 2025. U.S. GNF firms regularly provide audit reports for more than 100 issuers and must be inspected by the PCAOB annually.
- Big Four firms: The aggregate Part I.A deficiency rate for the Big Four U.S. accounting firms, which as of Dec. 31, 2025, collectively audited approximately 80% of the market capitalization of public companies listed on U.S. exchanges, decreased to 8% in 2025, from 20% in 2024.
- U.S. non-affiliated firms (annual): Part I.A deficiency rates at the annually inspected NAF firms decreased to 18% in the aggregate in 2025, compared to 52% in 2024. U.S. NAF firms that regularly provide audit reports for more than 100 issuers must be inspected by the PCAOB annually.
- U.S. non-affiliated firms (triennial): Firms in this category regularly provide audit reports for 100 or fewer issuers and must be inspected by the PCAOB at least triennially (i.e., not less frequently than once every three years). Aggregate Part I.A deficiency rates in this category dropped to 32% in 2025, from 53% in 2024.
- Non-U.S. firms: The aggregate deficiency rate at non-U.S. GNFs increased to 26% in 2025, from 24% in 2024. Non-U.S. NAF deficiency rates declined in the aggregate from 76% in 2024 to 58% in 2025.
“Modernizing PCAOB’s inspections process is critical to fulfilling our mission as super intelligence and the digital age continue to reshape the auditing profession at an unprecedented pace,” PCAOB Chairman Demetrios Logothetis said in a statement on Oct. 22. “First and foremost, we are working to identify the factors that produced these results in order to better understand both the drivers of improving audit quality and the root causes of audit deficiencies. This will enable the PCAOB to deliver more meaningful insights that support high-quality audits and investor protection.”
The PCAOB’s U.S. GNF inspections in 2025 included targeted reviews of areas related to emerging audit risks and issues. Targeted reviews consisted of inspecting portions of public company audits related to the following areas:
- Audit work completed at shared service centers.
- U.S. firm participation as an other auditor, when another member firm is the lead auditor.
- Technology-based tools (e.g., software audit tools) used to analyze information in electronic
form. - Cash flow statements, segment reporting, and disclosures related to supplier finance programs.
During 2025, instead of using a dedicated target team across all topics selected for a targeted review as in prior years, the PCAOB says it began shifting to an approach that leverages multiple teams comprised of inspectors highly specialized in a particular targeted review topic.
Photo credit: Public Company Accounting Oversight Board/Flickr
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