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The stern-parent vibes keep coming from the Public Company Accounting Oversight Board (PCAOB), which found deficiencies in nearly half of the audit engagements it inspected last year, the auditor watchdog reported last week. But not all the stats were sobering, and there were even glimpses of improvement among the Big Four.
Investigators looked at 230 engagements from Big Four firms in 2023, found that the overall deficiency rate has started to “level off,” and that some (relatively) smaller firms had fewer dings against them than in 2022’s report. For all the improvement, 46% of all engagements had at least one serious lapse, or I.A deficiency. Lapses have now increased three years in a row.
“These inspection results point to some small signs of movement in the right direction,” Chair Erica Williams said in a press release. “Still, overall deficiency rates are unacceptable.”
Big ups. The Big Four’s record on I.A deficiencies was more encouraging than the overall number. Their combined share of inspected audits with one I.A deficiency remained at 26% for the second year running, and their share of audits with more than one of the deficiencies fell (one percentage point) to 20%. The board had fewer quality control criticisms of the firms “for the first time in three years,” it reported.
Uneven. The “leveling off” wasn’t exactly level across all firms. EY and KPMG had fewer I.A deficiencies than in 2022, while the opposite happened at PwC and Deloitte & Touche. (The latter pair still had fewer engagements marred by deficiencies overall than in the previous year, though.) Grant Thornton and BDO, with a combined 57 scrutinized engagements, fared much worse than any of the Big Four—and much worse than their 2022 selves. Just under one in three of Grant Thornton’s inspected engagements had deficiencies in 2022, a share that spiked to 54% last year, while BDO’s share jumped from 66% to 86%.
Coming down hard. It must be nice for the board—which has been ratcheting up enforcement since Williams joined it in 2022—to have a little bit of somewhat good news. Just a couple weeks ago, the board slammed auditors for a third straight year of deficiencies in engagements for broker-dealers.