The Public Company Accounting Oversight Board released its annual inspection reports Thursday for the largest six audit firms indicating better results, albeit with a mostly reconstituted board and inspection program.
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At PricewaterhouseCoopers, six of the 64 audits reviewed in 2025 were included in Part I.A of the report due to the significance of the deficiencies identified, about a 9% Part I.A deficiency rate. The identified deficiencies primarily related to the firm's testing of controls over and/or substantive testing of revenue and related accounts and long-lived assets. That was an improvement over last year's report, where 10 of the 64 audits reviewed by the PCAOB in 2024 were included in Part I.A of the report due to the significance of the deficiencies identified, a 16% Part I.A deficiency rate.
At Deloitte, three of the 64 audits reviewed by the PCAOB in 2025 were included in Part I.A of this report due to the significance of the deficiencies identified, or less than a 5% Part I.A deficiency rate. The identified deficiencies related to the firm's testing of controls over and/or substantive testing of revenue. As with PwC, that too represented an improvement over last year's report, when nine of the 63 audits reviewed by the PCAOB in 2024 were included in Part I.A of the report due to the significance of the deficiencies identified, for a 14% Part I.A deficiency rate.
(Read more: PCAOB sees improvements in largest audit firms)
At KPMG, eight of the 64 audits reviewed in 2025 were included in Part I.A of this report due to the significance of the deficiencies identified, for a 12.5% Part I.A deficiency rate. The identified deficiencies primarily related to the firm's testing of controls over and/or substantive testing of inventory and other assets. That indicated a major improvement over last year for KPMG, when 13 of the 64 audits reviewed in 2024 were included in Part I.A of its report due to the significance of the deficiencies identified, a 20% Part I.A deficiency rate.
At Ernst & Young, three of the 64 audits reviewed in 2025 were included in Part I.A of this report due to the significance of the deficiencies identified, less than a 5% Part I.A deficiency rate, as with Deloitte. The identified deficiencies related to the firm's testing of controls over and/or substantive testing of revenue and related accounts, income taxes, and insurance-related assets and liabilities, including insurance reserves. Like KPMG, that was a big improvement over last year's report for EY, when 18 of the 64 audits reviewed by the PCAOB in 2024 were included in Part I.A of this report due to the significance of the deficiencies identified, a 28% Part I.A deficiency rate.
EY said that was the best inspection the firm has ever had, showing a 23-percentage-point improvement from 2024's 28% rate. It said that was a direct result of its $1 billion investment in technology and talent to improve audit quality, including expanded use of AI and advanced analytics, investments in continuous learning, and redesigning work so teams focus on the areas that require the highest levels of judgment and insight
"Trust fuels capital markets and high-quality audits play an essential role in building that trust," said Joe Link, EY Americas assurance vice chair, in a statement Thursday. "Our historic results in the 2025 PCAOB inspection report validate the investments we've made in technology, data analytics, streamlined methodologies and our people to strengthen trust in financial reporting."
At Grant Thornton, which recently announced a $5 billion acquisition of CBIZ, which would make it the fifth largest firm when it's completed, the results also indicated improvement. For Grant Thornton, nine of the 27 audits reviewed in 2025 were included in Part I.A of the report due to the significance of the deficiencies identified, a 33% deficiency rate. The identified deficiencies primarily related to the firm's testing of controls over and/or substantive testing of revenue, inventory, and investment securities. Last year, for Grant Thornton LLP, 13 of the 27 audits reviewed by the PCAOB in 2024 were included in Part I.A of the report due to the significance of the deficiencies identified, a 48% Part I.A deficiency rate.
At BDO USA, 10 of the 29 audits reviewed in 2025 were included in Part I.A of this report due to the significance of the deficiencies identified, or about a 34% Part I.A deficiency rate. The identified deficiencies primarily related to the firm's testing of controls over and/or substantive testing of revenue and related accounts, goodwill and intangible assets, and long-lived assets. That was also a big improvement over last year's report for BDO, when 18 of the 30 audits reviewed in 2024 were included in Part I.A of the report due to the significance of the deficiencies identified, a 60% deficiency rate.
The PCAOB's mostly new board has announced plans to overhaul its inspection process by looking at a firm's overall system of quality control instead of deficiencies for specific engagements.
"When we inspect at the quality control level, we are not only looking at whether an audit was performed appropriately," said PCAOB chair Demetrios Logothetis at a recent meeting. "We are evaluating whether the system — the governance, culture, risk assessment, monitoring, and remediation — is functioning in a way that consistently produces high-quality audits."
