Audit Deficiency Rate Falls to 23% for Public Firms
Public company operators should monitor audit quality trends as oversight bodies tighten requirements for quality control.
Updated on Oct. 26, 2026 in Public Companies
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The Public Company Accounting Oversight Board reported that the estimated audit deficiency rate fell to 23% in 2025, down from 46% in 2023. This data, based on reviews of 780 audits, provides a benchmark for financial reporting accuracy for U.S. public company leadership.
Why it matters
Audit deficiency trends serve as a critical proxy for the reliability of financial reporting that operators must rely on for capital allocation, compliance, and risk assessment. The ongoing reduction in these rates suggests a sector-wide improvement in the quality control measures that protect the integrity of financial statements.
The PCAOB inspection of 143 firms covering 780 audits found an overall deficiency rate of 23% in 2025, significantly lower than the 46% rate recorded in 2023. Big Four firms, which audit 80% of U.S. market capitalization, maintained an 8% deficiency rate during the same period.
The players
Public Company Accounting Oversight Board
The private-sector, non-profit corporation created by the Sarbanes-Oxley Act to oversee auditors of public companies.
The details
The PCAOB identifies audit deficiencies through Part I.A reviews of individual company audits. These inspections evaluate how effectively firms maintain quality control, accountability, and the application of technology when testing client financials. While the overall deficiency rate has trended downward, non-U.S. global network firms saw their estimated deficiency rate rise to 26% in 2025, compared to 24% in 2024.
Timeline
2023: Overall audit deficiency rate hit 46%.
2024: Overall audit deficiency rate fell to 38%.
2025: PCAOB inspected 143 firms and observed a 23% overall deficiency rate.
December 31, 2025: Big Four firms audited 80% of U.S. public market capitalization.
October 22, 2026: PCAOB staff published the inspection report.
Market Landscape
The PCAOB inspections follow the regulatory framework established by the Sarbanes-Oxley Act to ensure auditor accountability. The reduction in deficiency rates reflects an ongoing industry trend toward stricter adherence to professional standards set under this oversight regime.
Operators should review their own external auditor's track record against these broad industry trends to gauge potential reporting risks. As oversight shifts focus toward technology and internal quality controls, ensure that your internal financial controls are prepared for increasingly rigorous scrutiny.
The takeaway
The decline in audit deficiency rates indicates that while system-wide quality is improving, regional variations remain. Monitor your firm's specific auditor performance metrics to ensure they align with the higher standards now expected by the PCAOB.
Further reading
For broader context on current corporate reporting requirements, visit the Public Companies section.
Source note: This article includes information reported by Thomson Reuters.
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