The International Ethics Standards Board for Accountants is mulling changes in its auditor independence standards for audits of collective investment schemes involving connected parties and pension funds.

The IESBA released a consultation paper Monday asking for feedback on whether revisions to the International Code of Ethics for Professional Accountants (including International Independence Standards are needed to address the independence of auditors when they carry out audits of collective investment vehicles and pension funds.

Such arrangements allow investors to pool their funds and often rely on external parties for functions typically managed internally in conventional corporate structures, IESBA noted. This structure introduces specific relationships and need to be carefully considered to safeguard against any threats to auditor independence.

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“Investment schemes play a critical role in both the savings and retirement of ordinary citizens and in the development and growth of our economies,” said IESBA chair Gabriela Figueiredo Dias in a statement. “This underscores the high level of public interest, and therefore the fundamental role of the independent audit, in this segment of the global financial system. Through this consultation, we are inviting stakeholders to share their insights and perspectives on specific matters to ensure that our independence standards remain relevant and capable of consistent application across audits of these schemes globally.”

Some of the main areas of focus in the consultation include the definition of “related entity” in IESBA’s ethics code and its applicability to audits of investment schemes, along with the connected parties that should be considered in relation to the assessment of auditor independence with respect to the audit of an investment scheme. Another focus involves the application of the ethics code’s conceptual framework when assessing threats to independence resulting from interests, relationships or circumstances between the auditor of an investment scheme and connected parties.

IESBA is asking stakeholders such as financial industry representatives, audit firms, experts, investors, regulators and jurisdictional standard-setters to submit their comments electronically through the IESBA website by June 30, 2025. 

The Internal Revenue Service has reportedly axed more jobs at the height of tax season, placing 50 senior IT leaders on administrative leave, on top of the thousands of jobs already cut, as the union representing Treasury Department employees filed suit over President Donald Trump’s executive order stripping the union of collective bargaining rights.

The IRS sent an email Friday evening to employees such as associate and deputy associate chief information officers, according to the Federal News Network, saying they weren’t required to report to the office and they would lose access to their offices and computers, including email. However, they would continue to receive their full salary and benefits.

“This paid administrative leave status will remain in effect until further notice,” the email said. “You will continue to receive your full salary and benefits during the entirety of this administrative leave period. You are directed not to perform any work-related tasks during this administrative leave period.”

The Trump administration has responded to a court’s order requiring it to reinstate approximately 24,000 workers across 18 federal agencies by placing most of them on paid administrative leave instead. The IRS has so far cut about 7,320 workers this way, according to The New York Times, or about 13% of its workforce, while up to 5,000 employees have accepted voluntary buyouts. Estimates of the planned cuts vary from 20% up to 50% of the IRS workforce. The IRS is also facing another budget cut of $20.2 billion under the recent deal to avert a government shutdown.

Federal workers are also facing the threat of a loss of their collective bargaining rights after Trump signed an executive order Thursday removing the requirements from employees at agencies including the Treasury Department that he deemed to have national security missions. On Monday, the National Treasury Employees Union filed a lawsuit to stop the move.

“The law plainly gives federal employees the right to bargain collectively and the shocking executive order abolishing that right for most of them, under the guise of national security, is an attempt to silence the voices of our nation’s public servants,” said NTEU national president Doreen Greenwald in a statement. “It is also a continuation of the administration’s efforts to deny the American people the vital services that these talented civil servants provide by making it easier to fire them without any pushback from their union advocates.”  

The lawsuit, filed in U.S. District Court in the District of Columbia, says the order eliminating union rights for two-thirds of the entire federal workforce is in direct conflict with the law that Congress passed specifically to facilitate and strengthen collective bargaining in the federal sector.

The Public Company Accounting Oversight Board’s inspection staff found noticeable improvements in the deficiency rates of the six largest global auditing firms, according to a report Monday.

In 2024, the PCAOB observed a tangible decrease in Part I.A deficiency rates, on average, across all inspected firms, as well as a substantial improvement, in the aggregate, among the largest firms it inspects annually. The improvement follows increased efforts by the PCAOB to encourage firms to reverse the trend of rising deficiency rates following the pandemic. 

“We challenged the audit profession to do better for America’s investors, and these significant improvements demonstrate real progress in protecting investors,” said PCAOB chair Erica Williams in a statement. “Still, our work is far from over, and I urge the audit profession to build on this momentum.”

For all inspected firms, the aggregate Part I.A deficiency rate decreased to 39% in 2024, down from 46% in 2023. For the Big Four U.S. firms (Deloitte, EY, KPMG and PwC), which as of Dec. 31, 2024, collectively audit about 80% of the market capitalization of public companies, the aggregate Part I.A deficiency rate decreased to 20% in 2024, down from 26% in 2023.

The aggregate Part I.A deficiency rate for the six U.S. global network firms (BDO USA, Deloitte, EY, Grant Thornton, KPMG and PwC) decreased to 26% in 2024, from 34% in 2023.

Results at the eight annually inspected U.S. non-affiliated firms held steady, decreasing to 52% in the aggregate in 2024, compared to 53% in 2023 (when the eight inspected firms were Marcum, RSM US, Crowe, Withum, Moss Adams, Baker Tilly US, B F Borgers and Cohen & Company, Ltd., though BF Borgers was suspended last year and Marcum was acquired by CBIZ). While the same firms are not inspected year-to-year, the PCAOB saw improvements at the non-affiliated firms and global network triennially inspected firms. Aggregate deficiency rates at NAF triennially inspected firms decreased from 67% in 2023 to 61% in 2024, and GNF triennially inspected firms decreased from 35% in 2023 to 26% in 2024.

Williams has called on firms to improve their audit quality since she became chair of the PCAOB in 2022, and the PCAOB has been focusing on encouraging auditing firms to address their high deficiency rates coming out of the pandemic. Some of the initiatives include publishing more information, resources and tools to help firms improve their audit quality; increasing transparency; engaging regularly with audit firms; providing focused support to smaller firms; publishing implementation guidance for new PCAOB standards; prioritizing guidance and communication regarding remediation submissions for quality control deficiencies; engaging directly and regularly with U.S. audit committees; and increasing the PCAOB’s focus on the effect of firm culture on audit quality.

The PCAOB began seeing deficiency rates leveling off at the largest firms last year when it released its 2023 inspection results for them. On Monday, the PCAOB released separate inspection reports for the six largest firms. 

At BDO USA, P.C, 18 of the 30 audits reviewed in 2024 were included in Part I.A of the report due to the significance of the deficiencies identified, a 60% deficiency rate. The identified deficiencies mainly related to BDO’s testing of controls over and/or substantive testing of revenue and related accounts, goodwill and intangible assets, and business combinations. However, that represented an improvement over BDO USA’s 2023 results, when 25 of the 29 audits reviewed by the PCAOB in 2023 were included in Part I.A, an 86% Part I.A deficiency rate.

At Deloitte & Touche LLP, nine of the 63 audits reviewed by the PCAOB in 2024 were included in Part I.A of the report due to the significance of the deficiencies identified, for a 14% Part I.A deficiency rate. The identified deficiencies mainly related to Deloitte’s testing of controls over and/or substantive testing of revenue, allowance for credit losses, and leases. That too was an improvement for Deloitte, where in its 2023 report, 12 of the 56 audits reviewed by the PCAOB in 2023 were included in Part I.A of the report, translating into a 21% Part I.A audit deficiency rate.

At Ernst & Young LLP, 18 of the 64 audits reviewed by the PCAOB in 2024 were included in Part I.A of this report due to the significance of the deficiencies identified, a 28% Part I.A deficiency rate. The identified deficiencies primarily related to EY’s testing of controls over and/or substantive testing of revenue and related accounts, inventory and long-lived assets. That again was an improvement over 2023’s inspection report for EY, when 22 of the 59 audits we reviewed in 2023 are included in Part I.A, for a 37% deficiency rate.

At Grant Thornton LLP, 13 of the 27 audits reviewed by the PCAOB in 2024 were included in Part I.A of this report due to the significance of the deficiencies identified, a 48% Part IA deficiency rate. The identified deficiencies primarily related to the firm’s testing of controls over and/or substantive testing of revenue and related accounts and inventory. While a 48% deficiency rate may seem high, it was better than the 54% rate on the 2023 inspection report for GT, when 15 of the 28 audits reviewed in 2023 were included in Part I.A.

For KPMG LLP, 13 of the 64 audits reviewed in 2024 were included in Part I.A of its report due to the significance of the deficiencies identified, a 20% Part I.A deficiency rate. The identified deficiencies mainly related to the firm’s testing of controls over and/or substantive testing of revenue and related accounts and allowance for credit losses. That too was an improvement over the 15 of 58 audits reviewed in 2023 that were included in Part I.A of the 2023 report on KPMG, a 26% Part I.A deficiency rate.

For PricewaterhouseCoopers LLP, 10 of the 64 audits reviewed by the PCAOB in 2024 were included in Part I.A of the report due to the significance of the deficiencies identified, a 16% Part I.A deficiency rate. The identified deficiencies primarily related to the firm’s testing of controls over and/or substantive testing of revenue and related accounts and the allowance for credit losses. That was comparable to the 2023 report for PwC, when 10 of the 57 audits reviewed by the PCAOB in 2023 were included in Part I.A of the report, an 18% Part I.A deficiency rate.