A staff report from the Public Company Accounting Oversight Board (PCAOB) states that its inspections of accounting firm audits uncovered more deficiencies last year than in the previous year, a finding that Chair Erica Y. Williams called “absolutely unacceptable.”

Approximately 40 percent of the audits reviewed will have one or more deficiencies that will be included in Part I.A of the individual audit firm’s inspection report, up from 34 percent in 2021 and 29 percent in 2020.

These deficiencies are up for nearly every category of the 157 audit firms the PCAOB inspected in 2022, including global network firms both in the United States and internationally, Williams said in a statement. 

“[A]udit firms must make changes to turn things around and live up to their responsibility to investors,” Williams said in a statement that announced the findings. “The PCAOB will continue demanding firms do better, conducting transparent inspections, and bringing strong enforcement actions where appropriate. We are also asking audit committees to hold firms accountable by posing tough questions to their auditors on behalf of investors.”

Although staff report, titled "Staff Update and Preview of 2022 Inspection Observations," noted that the PCAOB staff does not analyze the root causes of deficiencies, many firms do. Some firms attributed the deterioration of audit quality in part “to higher-than-normal staff turnover, use of less experienced staff in general, and the ongoing impact of COVID-19 and related remote work.”

Williams pushed back on that reasoning, saying that firms should have strategies in place to address such issues. “That war for talent is something that has been around and is no longer a new phenomenon and so firms again really do have to meet this responsibility and turn this troubling trend around,” she said, according to The Wall Street Journal. “We are three years out from the pandemic, and firms have a responsibility to meet these challenges head-on,” she said, according to The Financial Times.

The report noted that it "represents the views of PCAOB staff and not necessarily those of the Board. It is not a rule, policy, or statement of the Board."