On July 31, the Public Company Accounting Oversight Board released the inspection reports for the eight U.S. accounting firms that were subject to annual inspection in 2024, but that are not global network firms. In 52 percent of the 2024 engagements the PCAOB inspected for these eight firms, it found one or more Part I.A deficiencies – that is, deficiencies of such significance that it appeared that the firm did not obtain sufficient evidence to support its opinion.  This compares to a nearly-identical 53 percent deficient engagement rate for these firms in 2023.  The deficient engagement rate for all PCAOB 2024 inspections was 39 percent.  For the six global network firms, the 2024 rate was 26 percent, and for the Big Four it was 20 percent. See How the PCAOB Staff Sees the 2024 Inspection Results, March-April 2025 Update.

The Sarbanes-Oxley Act requires that the PCAOB annually inspect every firm that issues 100 or more public company audit reports.  In 2024, 14 firms met that threshold.  On March 31, the PCAOB issued inspection reports for the U.S. affiliates of the six global network accounting firms -- BDO, Deloitte, E&Y, Grant Thornton, KPMG, and PwC.  See 2024 PCAOB Large Firm Inspection Reports, March-April 2025 Update. The remaining eight firms subject to annual inspection in 2024 were Baker Tilly US, LLP (Baker Tilly), Cohen & Company, Ltd. (Cohen), Crowe LLP (Crowe), Forvis Mazars, LLP (Forvis), Marcum LLP (Marcum), Moss Adams (Moss Adams), RSM US LLP (RSM), and WithumSmith+Brown, PC (Withum). This post analyzes the 2024 inspection reports of these eight firms and compares them to last year’s results. Audit committees should review their audit firm’s inspection report and discuss it with their engagement partner. The information below is intended to provide context for that discussion. 

Overview of Eight Firms’ 2024 Inspection Results

As noted above, in 52 percent of the eight firms’ audit engagements it inspected in 2024, the PCAOB found one or more Part I.A deficiencies.  (In this post, the percentage of inspected engagements in which the staff found one or more Part I.A deficiencies is referred to as the “deficient engagement rate” or DER). Compared to 2023, the DER fell for three of the firms, rose for three, and was unchanged for the other two. Forvis experienced the greatest improvement, with its DER falling from 90 percent in 2023 to (a still high) 71 percent in 2024. See Table 1.  (The tables referenced in this discussion appear in the “Tabular Comparison of the Eight Firms’ 2024 Reports” section of this post, which follows the summaries of the eight reports.)

Cohen’s 2024 inspection results were the best in the group, followed by Crowe. The Board found deficiencies in one of the nine Cohen audits it inspected (11 percent). Cohen’s 2023 DER was also 11 percent. Crowe had three deficient engagements (18 percent). At the other end of the spectrum, Marcum had the highest percentage of deficient engagements. The Board found problems with 21 of the 26 Marcum audits it inspected or 81 percent, the same DER as last year.

An engagement in Part I.A of an inspection report may contain one or more audit deficiencies. Therefore, in addition to comparing their DERs, another way of assessing the firms’ inspection results is to compare the number of individual audit deficiencies the Board found.  See Table 2. Cohen and Crowe were also the best performers by this metric.  For Cohen, the Board inspected nine engagements and found one audit deficiency – 0.1 deficiencies per inspected engagement and one deficiency per engagement in Part I.A.  In Crowe’s report, there were 0.5 deficiencies per inspection and an average of 2.7 deficiencies per Part I.A engagement. In contrast, for Marcum, the comparable numbers were 4.9 deficiencies per inspection and an average of 3.9 deficiencies per Part I.A engagement. Forvis had 2.7 deficiencies per inspection and an average of 3.8 deficiencies per Part I.A engagement.  Table 3 provides a similar comparison based on the number of auding standards cited in each inspection report.

In the aggregate for the eight firms, 36 percent of the 122 inspected engagements were integrated audits of both internal control over financial reporting (ICFR) and the financial statements.  Inspectors found ICFR audit deficiencies in 50 percent of the integrated audits they inspected, while 48 percent of all inspected engagements were found to have a financial statement audit deficiency. Thirty-four percent of audit engagements described in Part I.A of the eight firms’ 2024 inspection reports included an ICFR deficiency, while 92 percent included a financial statement audit deficiency. AS 1105, Audit Evidence, which requires the auditor to plan and perform audit procedures to obtain sufficient appropriate audit evidence to provide a reasonable basis for his or her opinion, was the most frequently cited auditing standard in Part I.A of the eight reports.  See Table 4.  “Did not perform sufficient testing related to a significant account or disclosure or to address an identified risk” in a financial statement audit was the most frequent audit deficiency. See Table 5.

Part I.B of an inspection report describes instances of non-compliance with PCAOB standards or rules that do not relate directly to the sufficiency or appropriateness of the evidence supporting an audit opinion. The 2024 inspection reports of the six firms contained 97 Part I.B deficiencies.  See Table 6.  The most-frequently cited PCAOB standard or rule in Part I.B was AS 2401, Consideration of Fraud in a Financial Statement Audit, and the most common Part I.B finding was the failure to make all required inquiries of management regarding fraud risks or risks of material misstatement. See Tables 7 and 8. 

Part I.C of an inspection report describes instances of potential non-compliance with rules related to auditor independence.  The 2024 inspection reports of the eight firms describe 26 instances of potential non-compliance with the independence rules, of which 17 were firm self-reported and nine were identified by the PCAOB.  See Table 9. As the PCAOB points out, disclosure in Part I.C of an instance of potential non-compliance with the independence rules does not necessarily mean that the Board or the firm has concluded that the firm was not objective and impartial throughout the audit and professional engagement period.  In each of the 26 instances of apparent non-compliance described in Part I.C of the eight reports, the firm involved evaluated the potential non-compliance and determined that its objectivity and impartiality were not impaired.

Summaries of Eight Firms’ 2024 Inspection Reports

Below are summaries of the 2024 inspection reports of each of the six U.S. GNF affiliates:

• Baker Tilly US, LLP.  The PCAOB reviewed twelve Baker Tilly public company audits, four of which were integrated audits of both the financial statements and ICFR.  In seven of the twelve audits (58 percent), the PCAOB identified deficiencies of such significance that it appeared that the firm had not obtained sufficient appropriate audit evidence to support its opinion. This compares to Baker Tilly’s 67 percent DER in 2023. Two of the seven engagements in Part I.A included deficiencies related to both the audit of the financial statements and the audit of ICFR, and five included only a financial statement audit deficiency. The PCAOB described 24 audit deficiencies (2.0 deficiencies per inspected engagement) associated with 26 auditing standards (2.2 standards per inspection) in Part I.A.  In Part I.B of the inspection report, the PCAOB identified four instances of noncompliance with PCAOB standards or rules that did not relate directly to the evidence the firm obtained to support an opinion.  In Part I.C, the Board described two instances of potential non-compliance with independence rules that the firm identified.

• Cohen & Company, Ltd.  The PCAOB reviewed nine Cohen public company audits, one of which was an integrated audit of both the financial statements and ICFR.  In one of the nine audits (11 percent), the PCAOB staff identified a deficiency of such significance that it appeared that the firm had not obtained sufficient appropriate audit evidence to support its opinion. Cohen’s DER was also 11 percent in 2023. The one engagement in Part I.A included a deficiency related to both the audit of the financial statements and the audit of ICFR.  The PCAOB described one audit deficiency (0.1 deficiencies per inspected engagement) associated with one auditing standard (0.1 standards per inspection) in Part I.A.  In Part I.B of the inspection report, the PCAOB identified three instances of noncompliance with PCAOB standards or rules that did not relate directly to the evidence the firm obtained to support an opinion. In Part I.C, the Board described no instances of potential non-compliance with independence rules.

• Crowe LLP.  The PCAOB reviewed 17 Crowe public company audits, twelve of which were integrated audits of both the financial statements and ICFR.  In three of the 17 audits (18 percent), the PCAOB staff identified deficiencies of such significance that it appeared that the firm had not obtained sufficient appropriate audit evidence to support its opinion. This compares to Crowe’s seven percent DER in 2023. All three of the engagements in Part I.A included deficiencies related to both the audit of the financial statements and the audit of ICFR. The PCAOB described 8 audit deficiencies (0.5 deficiencies per inspected engagement) associated with eight auditing standards (0.5 standards per inspection) in Part I.A.  In Part I.B of the inspection report, the PCAOB identified 20 instances of non-compliance with PCAOB standards or rules that did not relate directly to the evidence the firm obtained to support an opinion.  In Part I.C, the Board described five instances of potential non-compliance with independence rules that the firm identified.

• Forvis Mazars, LLP.  The PCAOB reviewed 14 Forvis public company audits, six of which were integrated audits of both the financial statements and ICFR. In ten of the 14 audits (71 percent), the PCAOB staff identified deficiencies of such significance that it appeared that the firm had not obtained sufficient appropriate audit evidence to support its opinion. This compares to Forvis’s 90 percent DER in 2023. Four of the engagements in Part I.A included deficiencies related to both the audit of the financial statements and the audit of ICFR, four included only a financial state-ment audit deficiency, and two included only an ICFR audit deficiency. The PCAOB described 38 audit deficiencies (2.7 deficiencies per inspection) associated with 40 auditing standards (2.9 standards per inspection) in Part I.A.  In Part I.B of the inspection report, the PCAOB identified 13 instances of noncompliance with PCAOB standards or rules that did not relate directly to the evidence the firm obtained to support an opinion. In Part I.C, the Board described one instance of potential non-compliance with independence rules that the firm identified.

• Marcum LLP.  The PCAOB reviewed 26 Marcum public company audits, six of which were integrated audits of both the financial statements and ICFR.  In 21 of the 26 audits (81 percent), the PCAOB staff identified deficiencies of such significance that it appeared that the firm had not obtained sufficient appropriate audit evidence to support its opinion. Marcum’s DER was also 81 percent in 2023. Three of the engagements in Part I.A included deficiencies related to both the audit of the financial statements and the audit of ICFR, 17 included only a financial statement audit deficiency, and one included only an ICFR audit deficiency. The PCAOB described 102 audit deficiencies (3.9 deficiencies per inspected engagement) associated with 112 auditing standards (4.3 standards per inspection) in Part I.A.  In Part I.B of the inspection report, the PCAOB identified 22 instances of noncompliance with PCAOB standards or rules that did not relate directly to the evidence the firm obtained to support an opinion.  In Part I.C, the Board described one instance it identified of potential non-compliance with independence rules and four instances that the firm identified.

• Moss Adams.  The PCAOB reviewed twelve Moss Adams public company audits, five of which were integrated audits of both the financial statements and ICFR.  In six of the twelve audits (81 percent), the PCAOB staff identified deficiencies of such significance that it appeared that the firm had not obtained sufficient appropriate audit evidence to support its opinion. This compares to Moss Adam’s 42 percent DER in 2023. Two of the engagements in Part I.A included deficiencies related to both the audit of the financial statements and the audit of ICFR, and four included only a financial statement audit deficiency.  The PCAOB described 19 audit deficiencies (1.6 deficiencies per inspection) associated with 19 auditing standards (1.6 standards per inspection) in Part I.A.  In Part I.B of the inspection report, the PCAOB identified 15 instances of noncompliance with PCAOB standards or rules that did not relate directly to the evidence the firm obtained to support an opinion.  In Part I.C, the Board described seven instances it identified of potential non-compliance with independence rules and three instances that the firm identified.

• RSM US LLP.  The PCAOB reviewed 17 RSM public company audits, eight of which were integrated audits of both the financial statements and ICFR.  In seven of the 17 audits (41 percent), the PCAOB identified deficiencies of such significance that it appeared that the firm had not obtained sufficient appropriate audit evidence to support its opinion.  This compares to RSM’s 47 percent DER in 2023. One of the engagements in Part I.A included deficiencies related to both the audit of the financial statements and the audit of ICFR, five included only a financial statement audit deficiency, and one included only an ICFR audit deficiency.  The PCAOB described 17 audit deficiencies (1.0 deficiencies per inspection) associated with 19 auditing standards (1.1 standards per inspection) in Part I.A.  In Part I.B of the inspection report, the PCAOB identified ten instances of noncompliance with PCAOB standards or rules that did not relate directly to the evidence the firm obtained to support an opinion.  In Part I.C, the Board described one instance of potential non-compliance with independence rules that the firm identified.

• WithumSmith+Brown, PC.  The PCAOB reviewed 15 Withum public company audits, two of which were integrated audits of both the financial statements and ICFR.  In nine of the 15 audits (60  percent), the PCAOB staff identified deficiencies of such significance that it appeared that the firm had not obtained sufficient appropriate audit evidence to support its opinion. This compares to Withum’s 40 percent DER in 2023. In two of the nine deficient engagements, the issuer concluded that its financial statements included misstatements and should be restated.  One of the engagements in Part I.A included deficiencies related to both the audit of the financial statements and the audit of ICFR, seven included only a financial statement audit deficiency, and one included only an ICFR audit deficiency.  The PCAOB described 28 audit deficiencies (1.9 deficiencies per inspected engagement) associated with 30 auditing standards (2.0 standards per inspection) in the engagements in Part I.A.  In Part I.B of the inspection report, the PCAOB identified ten instances of noncompliance with PCAOB standards or rules that did not relate directly to the evidence the firm obtained to support an opinion.  In Part I.C, the Board described one instance it identified of potential non-compliance with independence rules and one instance that the firm identified.

Tabular Comparison of the Eight Firms’ 2024 Reports

Part I.A Deficiencies

Table 1 compares the overall results of the 2024 inspections of the eight firms.  Table 1 also compares the results of the firm’s 2024 and 2023 inspections.

Table 1 focuses on the percentage of inspected engagements that have at least one audit deficiency.  Other indicators of the relative performance of the eight firms are the number individual audit deficiencies in each report and the number of auditing standards associated with those deficiencies.  These metrics differ from the DER because an engagement included in Part I.A may involve more than one deficiency and a deficiency may involve more than one auditing standard. Table 2 compares the eight firms’ inspections based on the number of audit deficiencies in each inspection report.  In some cases, there is an element of judgment in determining the number of deficiencies in a Part I.A engagement description. 

Table 3 compares the eight firms’ inspections based on the number of auditing standards associated with the deficiencies described in their inspection reports.

Aggregate Part I.A Data on Auditing Standards and Deficiency Descriptions

Table 4 lists the auditing standards most frequently cited as the basis for audit deficiencies in Part I.A of the eight firms’ 2024 inspection reports.  Table 4 also shows the percentage of all deficiencies that were based on each auditing standard.  The same auditing standard may have been cited multiple times in an engagement described in Part I.A.  Table 4 only includes standards cited four times or more. 

Each inspection report lists the most frequent audit deficiencies, divided between the most frequent deficiencies in financial statement (FS) audits and the most frequent deficiencies in ICFR audits. Table 5 aggregates these deficiency lists for the eight firms. Table 5 also indicates the percentage of engagements in the eight reports that included each deficiency. Table 5 only includes deficiencies listed twice or more. 

Part I.B Results

Part I.B of an inspection report describes instances of non-compliance with PCAOB standards or rules that do not relate directly to the sufficiency or appropriateness of the evidence supporting an audit opinion.  In 2024, the PCAOB found an aggregate of 93 such deficiencies in the eight inspections.

Table 6 presents the number of Part I.B deficiencies for each of the eight firms, Table 6 also includes the total number of inspected engagements for each firm. However, it appears that the PCAOB does not review all inspected engagements for every type of Part I.B deficiency. Therefore, the number of Part I.B deficiencies in a firm’s inspection report is not directly comparable to the number in other firms’ reports.

Table 7 lists the PCAOB auditing standards most frequently referenced in Part I.B deficiencies in the eight reports. Table 7 only includes deficiencies cited more than twice.

An auditing standard or rule may encompass more than one type of non-audit deficiency.  Table 8 sets forth descriptions of the non-audit deficiencies most frequently described in Part I.B of the eight firms’ 2024 inspection reports.  In some cases, the wording of the deficiency descriptions is not consistent across eight reports. Table 8 only includes standards or rules cited three or more times.

Part I.C Results

Part I.C of an inspection report discusses instances of potential non-compliance with SEC or PCAOB auditor independence rules. Part I.C describes both instances of potential noncompliance that the PCAOB identified and instances that the firm self-reported during its inspection.  Across the eight firms, the Board identified nine instances of potential independence rule noncompliance, seven of which were at Moss Adams. The eight firms self-reported an additional 15 such instances. 

Comparison of firm results. Table 9 presents the Part I.C instances of potential non-compliance with the independence rules for each of the eight firms.  In reviewing Table 9, readers should be aware that each inspection report contains the following warning:  

“While we have not evaluated the underlying reasons for the instance of apparent non-compliance with PCAOB Rule 3520, the number, large or small, of firm-identified instances of apparent non-compliance may be reflective of the size of the firm, including the number of non-U.S. associated firms in the global network; the design and effectiveness of the firm’s independence monitoring activities; and the size and/or complexity of the issuers it audits, including the number of affiliates of the issuer. Therefore, we caution against making any comparison of these firm-identified instances of apparent non-compliance across firms.”

Audit Committee Takeaways

1.     Comparisons between these eight firms should be made with caution. The firms differ in the nature of their practices and the types of audit clients they serve. While all eight firms audit 100 or more public companies, they do not necessarily have other common attributes. 

2.     As a group, these eight firms had relatively weak 2024 inspection results. The eight firms’ aggregate 52 percent DER rate was higher than the average of all firms inspected by the PCAOB in 2024 (39 percent), higher than the average of the other six annually inspected firms (26 percent), and higher than the Big Four average (20 percent).  However, the eight-firm average masks the wide differences in inspection results between the firms.  Two of the eight– Cohen (11 percent) and Crowe (18 percent) – had DERs that were lower than the Big Four’s 2024 DER average.

3.     By a wide margin, the most common Part I.B deficiencies for these eight firms related to consideration of the risk of fraud or misstatement.  The two most common auditing standards cited in Part I.B  were AS 2401, Consideration of Fraud in a Financial Statement Audit, and AS 2110, Identifying and Assessing Risks of Material Misstatement.  Similarly, the top four Part I.B deficiency descriptions involved either management inquiries regarding fraud risk or testing journal entries for misstatements due to fraud.  In contrast, audit committee communications lapses dominated the GNF Part I.B non-audit deficiencies.   

4.     Audit committees seeking to understand their audit firm’s inspection results and how they fit into the overall context of the 2024 inspections may want to review Spotlight: Staff Update on 2024 Inspection Activities.  This PCAOB publication describes in detail the 2024 public company inspection program and discusses the inspection staff’s views of the results. See How the PCAOB Staff Sees its 2024 Inspection Results, March-April 2025 Update.

5.     Audit committees should review their audit firm’s inspection report and discuss it with their engagement partner. Among other things, that discussion should focus on the reasons for engagement deficiencies described in the report, whether those deficiencies might have affected the company’s audit, what the firm is doing to strengthen its practice and prevent future adverse inspection findings, and how remedial steps might affect the company’s audit. As noted in past Updates, the audit deficiency descriptions and auditing standard deficiency tables in this post could also serve as a discussion topic checklist.  Of course, if the company’s engagement was the basis for an inspection finding, the audit committee should understand in depth the cause of the deficiency, the impact on the audit, and how the auditor plans to remedy it and prevent a recurrence.

6.     Audit committee may also want to consider the inspection-related questions that the PCAOB staff suggested in Spotlight: Staff Update and Preview of 2022 Inspection Observations.  The staff suggested that audit committees consider asking these four questions in discussions with their independent auditors:

• Has our audit engagement been inspected, and, if so, would you share the results? Were there any audit areas that required significant discussions with the PCAOB that did not result in a comment form?

• Has the engagement partner been inspected on other engagements? If so, what were the results of that inspection?

• What is the audit firm doing to address overall increased inspection findings?

• Are there any audit procedures that are unnecessarily complicated or not “straight-forward” because management is not providing clear, supportable information? (While not related to inspection reporting, this question “may encourage effective two-way communication to assist in understanding matters relevant to the audit.”)