PCAOB Audit Deficiency Rate Fell to 23% in 2025

Big Four inspections improved sharply, but the regulator says the newest results are still estimates.

• The estimated aggregate Part I.A deficiency rate fell to 23% for 2025 inspections, down from 38% one year earlier.

• The Big Four rate dropped to 8%, while all six large U.S. global network firms averaged 13%.

• The PCAOB reviewed portions of 780 public company audits at 143 firms, so the results measure selected audit work, not every engagement or every procedure.

Audit inspections have delivered some ugly report cards in recent years. The newest one is different.

The regulator estimates that 23% of inspected audits had a serious evidence problem in 2025. That was down from 38% in 2024 and 46% in 2023.

The improvement was even sharper at the Big Four. Their audit deficiency rate fell from 26% in 2023 to 20% in 2024, then to 8% in 2025. Those firms audit about 80% of the market value of companies listed on U.S. exchanges.

That is a meaningful change. It does not mean eight out of every 100 public company financial statements were wrong. It means inspectors found that auditors had not gathered enough appropriate evidence to support their opinions in the selected work they reviewed.

The regulator inspected 143 registered accounting firms and reviewed parts of 780 public company audits. Most of those audits covered fiscal years that ended in 2024 and were completed during 2025.

Inspectors do not reread every workpaper. They select engagements and focus areas based partly on risk, with some random selection for annual firms. Here's why that matters: riskier audits are supposed to produce more findings.

The full PCAOB inspection update also says the 2025 figures remain estimates until inspections are finalized and reports are published.

The six large U.S. global network firms, which include the Big Four, BDO and Grant Thornton, cut their average deficiency rate from 26% to 13%.

Large U.S. firms outside those global networks improved too. Their rate fell from 52% to 18%.

Smaller U.S. non-affiliated firms are generally inspected once every three years because they audit 100 or fewer issuers. Their rate dropped from 53% to 32%.

Every U.S. category got better, but an 8% Big Four rate and a 32% smaller-firm rate are not the same reality.

The clean U.S. trend did not carry everywhere.

Non-U.S. global network firms moved from a 24% deficiency rate in 2024 to an estimated 26% in 2025. Non-U.S. firms outside the big networks improved from 76% to 58%, but more than half of inspected audits in that group still had a Part I.A finding.

The mix changes each year. Some overseas firms were inspected for the first time, and a few firms can move the aggregate sharply.

Lower rates did not make the old trouble spots disappear.

The PCAOB still found problems with testing revenue, inventory, business combinations, long-lived assets and other estimates. Internal control audits also produced repeat issues, especially when teams did not properly test whether a control was designed well, operated effectively or relied on complete and accurate company data.

These are not exotic failures. They come down to whether the file proves the conclusion. A memo can sound confident while the sample, source data or challenge of management's estimate remains thin.

What should you do with a better national average? Compare the recurring findings with your firm's inspection data, coaching and root-cause work.

One better cycle can be noise. Three improving cycles start to look like a trend.

The aggregate rate has now moved from 46% to 38% to an estimated 23%. The Big Four moved even faster. Yet smaller and non-U.S. firms still show how uneven audit quality can be.

The 2025 results are good news for the profession, with an asterisk. Final reports could change the percentages, and the real win will be keeping the rate down when the audit mix, economy and risk profile change again.