Audit Quality on the Rise: US Regulator Sees Fewer Flaws in 2024 Inspections

By BATV News Desk

The landscape of audit quality in the United States saw a marked improvement in 2024, according to newly released data from the Public Company Accounting Oversight Board (PCAOB). The regulator reported a decrease in the number of flawed audits it identified during inspections—signaling a positive shift after years of concern following the pandemic.

In a notable reversal of a downward trend that began during the COVID-19 era, the PCAOB found deficiencies in 39% of the audits it inspected in 2024. This is a considerable drop from 46% in 2023, suggesting that recent regulatory measures aimed at tightening oversight and enforcing stricter audit standards may be yielding results.

Among the Big Four accounting firms—Deloitte, PwC, EY, and KPMG—audit quality saw noticeable improvements. Deloitte rose to the top, achieving the lowest deficiency rate among the group at 14%, down from 21% the previous year. PwC followed with a slight improvement to 16% from 18%, while EY remained at the bottom of the group despite an improvement from 33% to 28%, thanks to investments in audit technology and process standardization.

The PCAOB has ramped up its enforcement actions in recent years, including issuing higher fines and implementing more rigorous inspection criteria. Chair Erica Williams praised the progress, stating:

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

Mid-sized firms also saw gains, though they continue to lag behind. Notably, BDO USA, which had an eye-popping 86% deficiency rate in 2023, improved to 60% after making internal reforms. However, the data suggests these firms still face significant challenges in meeting audit quality standards.

While the PCAOB views the latest results as validation of its tougher approach, some professionals and at least one dissenting board member caution that the inspections may not fully reflect overall audit quality. Critics argue that inspections tend to focus on complex, high-risk audits that may not represent the broader performance of firms.

Despite ongoing debate, the PCAOB has encouraged corporate boards to actively review inspection reports when selecting auditors—underscoring the importance of transparency and accountability in the financial reporting ecosystem.

As regulatory pressure continues and the auditing landscape evolves, the improvements reported in 2024 offer a glimmer of confidence to investors and stakeholders alike.

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