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The Public Company Accounting Oversight Board (PCAOB) reported a lower rate of significant audit deficiencies in its 2025 inspections. In an October 22 update, the U.S. audit regulator said the aggregate Part I.A deficiency rate across inspected firms fell to 23%, from 38% in 2024. The review covered 143 registered public accounting firms and portions of 780 public company audits.
The decline is encouraging, but it needs careful interpretation. A Part I.A deficiency means inspectors concluded that an audit firm had not obtained sufficient appropriate evidence to support its opinion on the financial statements. The rate is an inspection measure; it is not an estimate of the share of all audits that are misstated or unreliable. Inspection schedules and results also differ across firm categories.
What the PCAOB reported
The aggregate rate for the six U.S. global network firms declined to 13% from 26%. For U.S. Big Four firms, it fell to 8% from 20%. Annually inspected U.S. non-affiliated firms reported 18%, down from 52%, while the triennially inspected non-affiliated group recorded 32%, down from 53%. Results were not uniformly lower: the rate for non-U.S. global network firms rose to 26% from 24%. Non-U.S. non-affiliated firms improved to 58% from 76%.
These are group-level findings. They do not show that every firm improved, and they do not replace review of a particular audit firm’s inspection reports, findings, and remediation history. Year-to-year comparisons may also reflect which audits were selected for inspection.
Questions for audit committees
For audit committees, the figures are a prompt for specific questions, not a reason to assume audit risk has disappeared. Ask the external auditor how inspection themes relate to the company’s higher-risk estimates, complex transactions, revenue recognition, IT controls, and use of specialists. Request a clear account of relevant findings, remediation actions, and evidence that the changes are working.
Internal audit leaders can use the update when coordinating with external auditors. Compare recurring inspection themes with internal quality reviews of evidence sufficiency, testing of estimates, supervision, and documentation. If the same weaknesses appear in both settings, a root-cause review may be more useful than another checklist update.
The PCAOB says it is examining the factors behind the improvement and the root causes of deficiencies. That work matters because inspection rates are signals, not explanations. The practical test is whether firms sustain strong evidence and review practices across engagements, including when timelines are tight and judgments are difficult.
Source: PCAOB, “Staff Update on 2025 Inspections of Public Company Audits,” October 22, 2026.
