Would you be surprised to learn that a group of accountants are overachievers?
Well, that’s certainly true of the PCAOB. The board published its 2024 annual report, which showed that it inspected more than 230 audit firms in the US and globally in FY 2024, and reviewed more than 900 audit engagements. Audit deficiencies, it found through those inspections, fell significantly. Two in five audits showed Part 1.A deficiencies last year, compared with 46% in 2023.
The decline “follows concentrated efforts by the PCAOB to reverse the trend of rising deficiency rates coming out of the pandemic,” Chair Erica Y. Williams wrote in the report, remarks that are probably the closest the board will come to taking a victory lap.
2024’s big new auditing regs: The PCAOB also adopted two important auditing standards last year: QC 1000, which requires public firms to identify risks to their quality control systems and take steps to address them, and AS 1000, which consolidates and clarifies a group of standards about auditors’ general responsibilities that dated back to 2003.
The board also amended several existing standards: AS 1105 and AS 2301, which deal with technology-assisted audit analysis; and Rule 3502, which stipulates that auditors can be held liable for their role in their firms’ noncompliance with regulations if they act “negligently,” not just “recklessly.” And it filed a new amendment allowing it to take action when firms fail to file reports or pay dues in two years.
A record year for fines: The PCAOB levied fines exceeding $35.5 million in 2024, breaking the previous record of $20 million it set in 2023. By far the largest single fine was the $25 million it assessed against KPMG Netherlands for allowing employees to cheat on internal training exams. It also fined Deloitte Indonesia and Deloitte Philippines $2 million after a similar cheating scandal.
Other hefty fines the PCAOB levied this past year included $2.75 million against PwC for compromising its independence when pursuing a “joint business relationship” with an audit client, and $2 million against WithumSmith+Brown for taking on far more SPAC-related audit engagements than it could reasonably handle.
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