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Regulators found fewer mistakes in audits of US companies in 2024, according to new data, in a reversal of a negative trend that began in the pandemic.
The Public Company Accounting Oversight Board hailed the results as vindication of its campaign to raise quality, which has involved levying higher fines and imposing tougher audit standards and has created friction with firms.
The regulator found flaws in 39 per cent of audits it inspected last year, down from 46 per cent in 2023. Among the Big Four firms, which audit four out of five US-listed companies, 20 per cent of inspected audits did not meet audit quality standards, down from 26 per cent the previous year.
Of the Big Four, Deloitte claimed the top slot in the league table from PwC, recording a deficiency rate of 14 per cent, down from 21 per cent in 2023. The PCAOB found flaws in 16 per cent of the PwC audits that it inspected in 2024, down from 18 per cent.
EY again scored worst among the Big Four, but its deficiency rate improved to 28 per cent after it invested in new technology and processes to standardise its audit work.
“We challenged the audit profession to do better for America’s investors, and these significant improvements demonstrate real progress in protecting investors,” said Erica Williams, PCAOB chair. “Still, our work is far from over, and I urge the audit profession to build on this momentum.”
The PCAOB also released inspection reports for several mid-market firms that showed improvements there, too. BDO — whose 86 per cent deficiency rate last year prompted it to beef up an internal body overseeing audit quality — improved the most, but inspectors still found flaws in 60 per cent of its audits.
The PCAOB has the power to inspect all accounting firms that audit US-listed companies, and has encouraged corporate boards to use its inspection reports when weighing which auditor to hire. Some in the profession and one dissident PCAOB board member have argued that inspections, which focus on the most tricky audits, are not the best measure of audit quality, however.
Large accounting firms accused Williams, an appointee of then-president Joe Biden, of disregarding their objections to new rules. Under the two previous administrations, the board has been replaced by new leadership within months; the first administration of Donald Trump made an abortive attempt to disband the organisation.
