Audit Deficiency Rates Decline Sharply According to New PCAOB Report

Audit quality across major accounting firms showed a notable improvement last year, driven by significant declines in deficiency rates, according to a comprehensive regulatory report. The Public Company Accounting Oversight Board released findings showing that overall deficiency rates dropped to 23 percent, marking a 15-point decrease from the 38 percent recorded in 2024.

Understanding Part I.A Deficiencies

The regulatory findings focus on Part I.A deficiencies, which occur when an audit firm fails to gather sufficient and appropriate evidence to properly support its opinion. The latest review evaluated portions of 780 public company audits across 143 registered accounting firms. The data reveals that improvements occurred in several categories, particularly in areas that have historically generated high numbers of inspection findings for regulators.

Performance Across Global and Domestic Networks

Performance metrics varied across different tiers of accounting firms, with several segments experiencing sharp downward trends in audit errors:

• U.S. global network firms saw their deficiency rates drop by 13 points year over year, moving from 26 percent in 2024 down to 13 percent in 2025.
• The Big Four accounting firms achieved an 8 percent deficiency rate, representing a 12-point drop from the 20 percent reported the previous year.
• U.S. non-affiliated firms inspected annually experienced a substantial 34-point drop, falling from 52 percent down to 18 percent in the aggregate.
• Triennial U.S. non-affiliated firms saw deficiencies decline by 21 points, dropping from 53 percent to 32 percent.

International segments presented a mixed outcome. Non-U.S. global network firms experienced a slight increase of two points, rising from 24 percent to 26 percent. Conversely, non-U.S. non-affiliated firms saw aggregate deficiencies decrease by 18 points, dropping from 76 percent to 58 percent.

Regulatory Response and Future Oversight

Demetrios Logothetis, chairman of the Public Company Accounting Oversight Board, emphasized the ongoing need to modernize inspection procedures. In a statement regarding the findings, Logothetis noted that the regulatory body is actively working to identify the specific factors that produced these positive results. Understanding the underlying drivers of improved audit quality and the root causes of remaining deficiencies will help the organization deliver more meaningful insights to support high-quality audits and protect public investors.