Are auditors getting better at their jobs?

Audit quality substantially improved in 2025, the PCAOB found. The rate of Part 1.A deficiencies—those involving insufficient evidence to support audit opinions—dropped to 23%, from 38% in 2024, staff wrote in a report.

At the Big Four firms, which audit 80% of the US market cap on public companies, the results were even more striking: Their Part 1.A deficiency rate plunged to 8% from 20% in 2024.

But audit quality also picked up at smaller firms. At firms auditing 100 or fewer issuers, deficiencies fell to 32%, from 53% in 2024.

2025’s results represent a marked improvement from 2022, when the deficiency rate reached 40%, a finding the PCAOB’s then-chair Erica Williams deemed “completely unacceptable,” and from 2023, when it climbed to 46%.

“There was clearly a post-pandemic spike” in deficiencies, Richard Chambers, former president and CEO of the Institute of Internal Auditors, told CFO Brew. In 2020, for instance, the deficiency rate was 29%.

The staff inspected 143 firms and reviewed parts of 780 public company audits. Most of the audits were of companies with fiscal years ending in 2024, which were completed in 2025.

Though the results are preliminary, the final version will likely show similar findings, Chambers, now a senior advisor at Optro, said. “For the larger firms, those figures are pretty much settled,” he said, though data for smaller firms may still shift.

But why? In the report, PCAOB staff hypothesized that the increase in audit quality resulted from changes such as more focused training, bringing staff back to the office, allotting more audit resources, managing partner workloads, and improving supervision and review. Firm leaders “appear to be strengthening leadership accountability for audit quality” leading up to the implementation of QC 1000 on December 15 of this year, the report said.

QC 1000 skew. In the coming years, PCAOB reports on audit quality may be hard to parse, Chambers warned, as the regulator plans to switch up its approach to inspections to focus more on firms’ quality control systems, using QC 1000 as a foundation. “That’s going to mean for at least a year that the deficiency rate is going to become less comparable,” he said.

However, Chambers argued, the new inspection methodology should prove welcome. “For the last two decades, the PCAOB has alluded to the fact that they want to become more risk-based in their inspections process, and I don’t think you could get any more risk-based than starting with the firm’s own system of quality control.” CFOs and audit committees will likely find that the new approach will “provide them more useful information on quality control,” Chambers said.

In context. Dennis McGowan, VP for professional practice and anti-fraud initiatives at the Center for Audit Quality (CAQ), observed that paying more attention to firms’ quality control systems will likely lead to greater understanding of “how firms identify, address, and prevent deficiencies at the system level, not just within individual audits.”

But McGowan also had a caution about keeping inspection report performance in context. “Inspection reports are an important accountability tool,” he told CFO Brew in an email, “but they are not intended to provide a comprehensive assessment of a firm’s overall performance…Investors and other stakeholders” benefit from considering inspection findings alongside other relevant information about audit quality and firm performance,” he said.

CFOs and audit committees, Chambers said, might learn more about the decline in deficiency rates by talking to the engagement teams at their individual audit firms. He suggested looking at the three-year trend in their auditors’ deficiency rates to gauge audit quality. Committees don’t need to wait for a PCAOB report to speak with their auditors, he noted. “There’s never been any reason that the audit committee couldn’t ask them how their report came out, how their inspection came out.”