Each audit season promises a fresh start, but chasing the dream of error-free audits seems to be just that — a dream. For the second consecutive year, the Public Company Accounting Oversight Board (PCAOB) has flagged an increase in audit deficiencies, finding that nearly half of inspected audits lacked enough evidence to support their conclusions. The PCAOB’s Erica Williams expressed dissatisfaction with the current state, calling the high error rate “unacceptable.”

• The Big Four (Deloitte, Ernst & Young, KPMG, PricewaterhouseCoopers) maintained a deficiency rate of 26% — up from their five-year average of 20% — indicating trouble in their audit departments.
• In contrast, firms like Grant Thornton and BDO missed over half of their errors — registering 56% and 86%, respectively, while smaller firms facing their first inspections performed the worst, with over 96% showing significant deficiencies.

Audit monopoly: The Securities and Exchange Commission is responsible for ensuring fair auditing, but in light of this year’s PCAOB findings, the agency faces accusations of censoring a study that criticized its audit regulations. According to research by academic fellows of the agency, the PCAOB favors the Big Four by imposing standards that are easier for them to meet due to their greater resources, potentially squeezing smaller firms out of the market, leaving lesser-known companies struggling to find auditors. Case Western Reserve University’s John Keyser notes, “There are differences between how big firms and small firms experience the remediation process… [The PCAOB] could allocate more resources to the smaller firms.”