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PCAOB inspections show signs of improvement in audit quality

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Auditing firms appear to be making headway on fixing some of the problems identified by the Public Company Accounting Oversight Board.

The results will show up in the inspection reports released next year by the PCAOB detailing the results of 2024 inspections at the largest firms. 

“The 2024 inspections cover audit work that mostly occurred in 2023 and early 2024,” said PCAOB chair Erica Williams during a speech Tuesday at the AICPA & CIMA Conference on Current SEC and PCAOB Developments. “Because this board arrived in early 2022, the audit work that occurred in late 2023 and early 2024 just begins to address the direction and guidance provided under this board. PCAOB staff has indicated that they expect the results of these inspections to provide the first glimpse of progress made by firms in response to calls for improvement of audit quality under this Board.”

She sees that as a reflection of the PCAOB’s efforts to improve audit quality under her tenure. “Today, three years into this board’s tenure, our inspectors are seeing significant improvements from the largest firms,” said Williams. “Results will be reflected in the 2024 inspection reports. To be clear, it will take some time for firms to fully reverse this trend. However, this news signals that the work of this board is taking root.”

However, she acknowledged that problems continue to linger, including a rise in the number of restatements by public companies. She cited a Financial Times article this week that found “the number of U.S. companies forced to withdraw financial statements because of accounting errors has surged to a nine-year high.”

“Restatements are one variable to take into consideration,” said Williams. “And here too, with the increase in restatements, we are beginning to see the results of the slippage of audit quality in prior years. But again, our staff is already seeing improvements. Moreover, we expect even greater improvements when some of our standards, including QC 1000, are fully implemented by the firms.”

PCAOB chair Erica Williams speaking at the AICPA Conference on Current SEC and PCAOB Developments

PCAOB chair Erica Williams speaking at the AICPA Conference on Current SEC and PCAOB Developments

The Securities and Exchange Commission approved the PCAOB’s new QC 1000 quality control standard in September.

“We believe QC 1000 will set the foundation for quality audits for the future,” said Williams. “A firm’s QC system influences virtually all firm activities. When QC systems operate ineffectively, investors are put at risk. But, when QC systems operate effectively, quality audits performed in accordance with applicable professional and legal requirements are likely to follow — leaving investors better protected. It strikes a balance by introducing a risk-based approach that can be applied by firms of varying sizes and complexity, while also imposing requirements to ensure each QC system is designed, implemented and operated with an appropriate level of rigor. Then it sets up a feedback loop, based on monitoring and remediation, designed to drive continuous improvement.”

She urged auditing firms not to lose focus and to continue to make progress on behalf of investors. Williams noted that the PCAOB staff recently conducted a study and found that audit firm culture can have an impact on audit quality for better or worse. Longer partner tenure also seems to correlate with fewer significant audit deficiencies highlighted in Part I.A of the inspection reports. 

After her speech, Williams and other members of the PCAOB were interviewed onstage by Center for Audit Quality CEO Julie Bell Lindsay. PCAOB board member George Botic said he believes the PCAOB is well aligned with the SEC on capital formation. Another board member, Christina Ho, said she believes there’s an opportunity to provide a higher level of transparency about the severity of the Part I.A deficiencies. The board members were also asked about their expectations for the SEC under Paul Atkins, who was named as the new chair by President-elect Trump to succeed Gary Gensler, who plans to step down on January 20, the date of Trump’s inauguration. 

Ho is expecting a more moderate approach and said she is looking forward to working with the new SEC chair. She was also asked about a report by a third party advisory group for the PCAOB on the use of emerging technologies for auditing. She said the report has been delivered to the board and believes the recommendations in it should be made public. 

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Accounting

PwC AI agent acts proactively to preserve value

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Big Four firm PwC announced new agentic AI capacities, including a model that proactively identifies areas of value leakage and acts inside the tools teams already use to fix them itself. 

The new solution, Agent Powered Performance, combines continuous AI-driven insight with embedded execution to address the problem of businesses only finding problems when they have already hurt performance. By actively monitoring and working inside the client’s existing systems, though, PwC’s agents can actively and autonomously address such issues. 

The software, which is supported by PwC’s recently released Agent OS coordination platform, is  embedded in enterprise systems to sense where value is leaking, think through the most effective performance strategies using predictive models and industry benchmarks, and act directly in tools like ERP or CRM software to make improvements stick. 

The system connects directly into ERP environments, continuously monitors key metrics, and acts inside the tools teams already use. For example, a supply chain agent might detect rising shipping costs and automatically reroute deliveries to reduce spend. Finance agents can spot and correct billing errors before they reach the customer. Clients typically see measurable efficiency gains in the first quarter, with continued improvements over time as the system learns and adapts.

“Too many transformations still rely on one-off pilots and stale data, stretching the gap from insight to impact and suffocating ROI,” said Saurabh Sarbaliya, PwC’s principal for enterprise strategy and value. “Agent Powered Performance flips the economics by distilling PwC’s industry transformation playbooks into AI agents that turn static insights into compounding gains, without rebooting each time.”

Agent Powered Performance is platform-agnostic and built on an open architecture so it can work across different LLMs based on client preferences and task-specific needs. It works with major enterprise platforms including Oracle, SAP, Workday and Guidewire.

Agent OS Model Context Protocol

PwC also announced that its Agent OS AI coordination platform now supports the Model Context Protocol, an open standard from Amazon-backed AI company Anthropic. 

By integrating this standard, agent systems registered as MCP servers can be used by any authorized AI agent. This reduces redundant integration work and the overhead of writing custom logic for each new use case. By standardizing how agents invoke tools and handle responses, MCP also simplifies the interface between agents and enterprise systems, which will serve to reduce development time, lower testing complexity, and cut deployment risk. Finally, any interaction between an agent and an MCP server is authenticated, authorized and logged, and access policies are enforced at the protocol level, which means that compliance and control are native to the system—not layered on after the fact. 

This means that agents are no longer siloed. Instead, they can operate as part of a coordinated, governed system that can grow as needs evolve, as MCP support provides the interface to external tools and systems. This enables organizations to move beyond isolated pilots toward integrated systems where agents don’t just reason, but act inside real business workflows. It marks a shift from experimentation to adoption, from isolated tools to scalable, governed intelligence.

Research Composer

Finally, a PwC spokesperson said the firm has also launched a new internal tool for its professionals called Research Composer, a patent-pending AI research agent embedded in the firm’s ChatPwC suite, designed to accelerate insight generation by combining web data with PwC-uploaded content. 

Professionals will use the Research Composer to produce in-depth, citation-backed reports for either the firm or its clients. The solution is intended to enhance the quality of client work by equipping teams with research and strategic analysis capabilities. 

The AI agent prompts users through a step-by-step research workflow, allowing them to shape how reports are packaged—tailoring the output to meet strategic needs. For example, a manager in advisory services might use Research Composer to evaluate white space opportunities across industries or geographies, drawing from internal reports and up-to-date market data.

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Accounting

Eide Bailly merges in Traner Smith

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Eide Bailly, a Top 25 Firm based in Fargo, North Dakota, is growing its presence in the Pacific Northwest by adding Traner Smith, based in Edmonds, Washington, effective June 2, 2025. 

Traner Smith’s team includes two partners and 16 staff members and specializes in tax compliance and advisory services. Financial terms of the deal were not disclosed. Eide Bailly ranked No. 19 on Accounting Today‘s 2025 list of the Top 100 Firms, with $704.98 million in annual revenue, approximately 387 partners and over 3,500 employees. 

Eide Bailly already has offices in Seattle, but hopes to grow further in the Pacific Northwest. “We’re pleased to welcome the talented team at Traner Smith to Eide Bailly,” said Eide Bailly managing partner and CEO Jeremy Hauk in a statement Monday. “Their expertise with high-net-worth individuals, real estate and privately held businesses aligns well with our strengths, and their client-centric approach is a perfect cultural fit. Having an office in Edmonds, Washington, is a great complement to our existing presence in Seattle. Together, we’re poised to deliver even greater value to families and businesses in the Seattle metro area.” 

“Joining Eide Bailly is a natural next step for us — it provides access to deeper technical resources in areas like state and local tax, national tax, succession planning and international tax while allowing us to continue the personalized service our clients value,” said Kevin Smith, a partner at Traner Smith, in a statement. 

“With this expanded support and platform, we’re excited to grow our reach, elevate what we do best, and help more clients than ever before,” said Shane Summer, another partner at Traner Smith, in a statement.

Eide Bailly has announced several other mergers in recent weeks. Earlier this month, it added Hamilton Tharp, a firm based in Solana Beach, California, and Roycon, a Salesforce consulting firm in Austin, Texas. In late April, it merged in Volpe Brown & Co., in North Canton, Ohio. Eide Bailly expanded to Ohio last year by merging in Apple Growth Partners. Last year, Eide Bailly also sold its wealth management practice to Sequoia Financial Group. The deal with Sequoia appears to be fueling the recent M&A activity. As part of the deal, Eide Bailly Advisors became part of Sequoia Financial, while Eide Bailly received an equity investment in Sequoia.

In 2023, Eide Bailly added Secore & Niedzialek PC in Phoenix, Raimondo Pettit Group in Southern California, Bessolo Haworth in California and Washington State, Spectrum Health Partners in Franklin, Tennessee, and King & Oliason in Seattle. In 2022, it merged in Seim Johnson in Omaha, Nebraska, and in 2021, PWB CPAs & Advisors in Minnesota. In 2020, it added Mukai, Greenlee & Co. in Phoenix, HMWC CPAs in Tustin, California, and Platinum Consulting in Fullerton.

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Accounting

BMSS announces investment, collaboration with Knuula

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Top 100 firm BMSS announced an investment in Knuula, an engagement letter and client documents software provider. The investment from BMSS came after successfully implementing Knuula over the past year to streamline its engagement letter process. It was after doing so that the firm’s leadership came to believe that Knuula could create complex client documents at an enormous scale, which was a huge need for the broader accounting industry. BMSS thought this presented a great opportunity to guide Knuula and help facilitate its growth. 

“We began working with Knuula in Spring 2024 to streamline our engagement letter process,” said Don Murphy, Managing Member of BMSS. “It quickly became clear that Knuula was not only a strong solution for us, but also an ideal partner in advancing industry-wide automation.”

While the specific terms of the deal were not disclosed, a spokesperson with Knuula said that, after this investment, BMSS and a collection of 21 of their partners now own 13% of the company. The investment represents not some passive revenue deal but an active collaboration between the two companies, with the spokesperson saying they will be working closely together on things like product development, new features, improvements, and networking.

The deal comes about a year after Knuula integrated with QuickFee, a receivables management platform for professional service providers, which allowed users to have engagement letters directly connecting to their QuickFee billing platform, tying the execution of the letter directly to the billing process. 

“We’ve long sought to partner with a firm focused on strategic innovation in the accounting space,” said Jamie Peebles, founder of Knuula. “To develop a perfect solution for large firms, it is ideal to have a partner that is willing to work closely together and iterate quickly. This requires constant feedback between our two teams. The IT team from BMSS worked with our development team constantly and helped us iterate rapidly. We also had consistent input from partners, manager, and administrative staff to help us make valuable changes to Knuula. BMSS was a perfect partner for us.”

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