Audit firms anticipate lighter US inspection regime
January 2, 2026
The PCAOB – an SEC-controlled body – inspects dozens of audits carried out by large firms each year and publishes reports on deficiencies it identifies
Accounting firms are reportedly expecting US regulators to reduce the number of audits they inspect after the Securities and Exchange Commission (SEC) signalled a rethink of oversight of the industry, the Financial Times has reported.
It comes as the SEC has indicated it will place greater emphasis on regulating accounting firms’ internal quality control systems, a move that has opened the door for firms to lobby for changes to an inspection regime they argue is overly focused on minor audit failings.
According to Dennis McGowan, VP for professional practice at the Centre for Audit Quality, which represents large accounting firms, the inspection programme has delivered improvements but was showing its age.
The Public Company Accounting Oversight Board (PCAOB) – an SEC-controlled body – inspects dozens of audits carried out by large firms each year and publishes reports on deficiencies it identifies. At the Big Four firms it examined 63 or 64 audits last year, up from 53 or 54 two years earlier.
The PCAOB has promoted its deficiency rate as an indicator of audit quality. That rate rose sharply after the Covid pandemic before falling over the past two years. Audit firms have argued privately that the earlier increase partly reflected inspectors identifying minor errors that would not previously have led to sanctions.
The PCAOB was established two decades ago in the wake of the Enron scandal to set audit standards for US-listed companies and to monitor firms’ compliance. While inspections are mandated by Congress, legislation does not specify a minimum number.
Kurt Hohl, SEC chief accountant, said at an industry conference in December 2025 that reform of the inspection process was “overdue”, given changes to standards governing firms’ quality control systems.
International regulators have introduced more detailed rules on how accounting firms should manage audit businesses, including oversight and quality controls. The PCAOB last year approved new rules on how firms operating in the US should monitor audit quality, although implementation has been delayed and the rules could still be revised.
Under the Sarbanes-Oxley law that created the PCAOB, only the results of individual audit inspections must be published. Findings from inspections of a firm’s quality management system are disclosed later only if the firm fails to address problems within a year.
Christina Ho, a PCAOB board member who has supported accounting firms in recent policy debates, said she expected the number of audit inspections to fall under the new SEC approach.
[Accountancy Today]
