Accounting

PCAOB sees improvements in largest audit firms

Published

1 year ago

March 31, 2025

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.

Accounting

FASB Standardizes Carbon Offsets Accounting Rules

Published

1 day ago

July 27, 2026

Business Finance News

FASB Standardizes Carbon Offsets Accounting Rules

In a decisive move toward standardized environmental financial reporting, accounting standards boards issued updated implementation guidance during the week ending July 25, 2026, regarding the formal recognition and valuation of corporate carbon offsets and environmental credits. The revised frameworks establish precise rules for how enterprises must measure, record, and disclose carbon credits on balance sheets, eliminating years of inconsistent reporting practices across public capital markets.

Under the finalized accounting standard, purchased carbon offsets can no longer be categorized under vague administrative expenses or unstandardized intangible asset accounts. Instead, organizations must classify environmental credits based on underlying operational intent—distinguishing between credits held for immediate compliance compliance obligations, long-term offset obligations, or active market trading. Furthermore, companies are required to evaluate carbon holdings for fair value impairment at the end of each reporting period, ensuring that depreciated or low-quality environmental credits do not distort corporate asset values.

The standardized rules carry significant implications for corporate audit committees and chief accounting officers. External audit firms are implementing rigorous verification protocols to validate the physical legitimacy, legal ownership, and scientific permanence of carbon credits claimed on balance sheets. Inaccurate or overstated carbon accounting claims now carry substantial financial litigation risk, alongside potential regulatory enforcement for misleading ESG disclosures.

To remain fully compliant, corporate accounting departments must establish centralized carbon tracking systems integrated into primary standard ERP ledgers. Accounting teams that proactively adopt standardized environmental reporting protocols will build investor credibility, streamline annual audit processes, and insulate their organizations against evolving regulatory scrutiny.

Accounting

Automated Tax Compliance Tools Reduce Risk

Published

1 day ago

July 27, 2026

Business Finance News

Automated Tax Compliance Tools Reduce Risk

Corporate tax departments reached a critical juncture in automated operational management. With nations worldwide rapidly enacting digital service taxes, localized value-added tax (VAT) mandates, and real-time electronic invoicing requirements, manual tax calculations have become obsolete. Modern corporate tax divisions are aggressively deploying AI-driven tax engine software to automate complex cross-border indirect tax calculations in real time.

The imperative for automated tax compliance stems from the sheer complexity of current trade policies and multi-jurisdictional commerce. E-commerce platforms, software vendors, and global manufacturers face constantly changing regional tax rates, statutory exemption rules, and cross-border tariff structures. Automated tax engines embed directly into enterprise enterprise resource planning (ERP) architectures, automatically applying correct tax codes at the point of sale, calculating real-time withholding amounts, and generating compliant e-invoices.

Automated audit trail generation represents another key advantage of modern tax tech integration. Advanced compliance platforms log every transactional tax determination on immutable digital ledgers, providing tax authorities with transparent, self-verifying audit trails. This capability drastically reduces the operational duration and administrative cost of corporate tax audits, protecting enterprises against severe penalties resulting from calculation errors or missed reporting deadlines.

For chief financial officers and tax directors, investing in automated tax compliance is a vital operational risk mitigation strategy. Automating routine tax calculations frees high-level accounting professionals to focus on strategic tax planning, transfer pricing optimization, and risk management in an increasingly complex global economic environment.

Accounting

Continuous Auditing Transforms Corporate ERPs

Published

7 days ago

July 21, 2026

Business Finance News

continuous auditing transforms corporate erps

As corporate accounting departments cross the threshold into late July 2026, the adoption of continuous, automated auditing systems has reached a definitive turning point. Driven by advances in artificial intelligence and deep integration with modern Enterprise Resource Planning (ERP) platforms, leading finance organizations are moving away from traditional, periodic post-hoc audits in favor of real-time, 100% transactional verification. This technological transition is redefining internal control environments, reducing compliance costs, and eliminating the structural delays inherent in legacy quarterly closing processes.

Unlike traditional auditing frameworks that rely on statistical sampling—a process that inevitably leaves operational blind spots—continuous auditing software monitors operational data feeds continuously. Every purchase order, electronic invoice, payroll disbursement, and cross-border wire transfer is automatically cross-referenced against established corporate governance parameters, regulatory tax schedules, and anti-fraud algorithms in real time. Anomalies or unauthorized ledger entries are flagged instantly, allowing internal audit teams to investigate and remediate compliance gaps immediately rather than months after the close of a financial period.

The implications for executive financial management are far-reaching. By embedding continuous verification directly into daily transaction workflows, chief financial officers gain uninterrupted visibility into the organization’s true financial standing. Real-time balance sheet auditing eliminates the severe operational bottlenecks associated with month-end and quarter-end financial reconciliations, freeing accounting professionals to focus on strategic financial modeling, tax planning, and capital allocation rather than manual data entry and spreadsheet consolidation.

However, implementing continuous auditing requires accounting leadership to invest heavily in data governance and technical upskilling. Internal audit teams must evolve from manual ledger reviewers into system architects capable of auditing complex algorithms and validating automated data pipelines. Accounting firms and corporate controllers that master continuous auditing will establish a resilient compliance framework capable of meeting stringent international regulatory standards with total transparency.