Audit quality improved in 2024

Somewhere, Erica Y. Williams is smiling.

Audit deficiencies dropped in 2024, the PCAOB reported in a staff publication, reversing a multi-year trend of rising deficiency rates. It observed that 39% of audits it inspected in 2024 had deficiencies, down from 46% in 2023. That’s still a “high” rate, the PCAOB said, and it’s greater than 2021’s 34% deficiency rate and 2020’s 29% rate. But it represents a move in the right direction.

The PCAOB noted a “tangible decrease in Part 1.A deficiency rates” across all firms it inspected, and “substantial improvement” among the largest firms. (Part 1.A deficiencies are those in which the PCAOB found that a firm didn’t obtain sufficient evidence to support its audit opinions.)

The larger firms were able to improve their audits, the PCAOB said, through more in-person work, more training of less-experienced staff, providing more national office resources on audit quality, and engaging in more supervision and review.

Among Big Four firms, which audit around 80% of all public company dollars, the deficiency rate dropped from 26% in 2023 to 20% in 2024. EY had the highest rate of deficiencies among the Big Four, at 28% (down from 37% in 2023). EY dropped 84 of its audit clients between January 2023 and August 2024 in order to help improve its audits.

Among non-Big Four large firms, BDO had a whopping 86% deficiency rate in 2023, which it brought down to 60% in 2024.

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