The U.S. members of the six global network accounting firms issue annual audit quality reports. These reports describe the firm’s commitment to audit quality, its performance on various self-selected quality-related audit metrics, and its plans to maintain and enhance the caliber of its audit performance. Because of their responsibility for the selection, evaluation, and retention of audit firms, audit committees are a key target audience for these reports.
The most recent reports for these six firms are listed below.
BDO: 2023 Audit Quality Report: Cultivating the Seed of Audit Quality (undated, released June 25, 2024)
Deloitte: Deloitte US 2024 Audit Quality Report (December 2024)
Ernst & Young: Our commitment to audit quality (November 2024)
Grant Thornton: Audit quality & transparency report 2023 (undated, released August 15, 2024)
KPMG: FY24 Audit Quality Report (January 2025).
PwC: Our focus on audit quality: 2024 Audit Quality Report (undated, released late 2024).
For a discussion of last year’s reports, see Four Large Firms Report on How They See Their 2023 Audit Quality, January 2024 Update.
Report Content
Each report is primarily a narrative discussion of the firm’s commitment to audit quality and how it seeks to achieve its quality objectives. The topics discussed in the reports vary from firm to firm, but include such matters as –
A message from leadership regarding the firm’s commitment to audit quality.
A statement of the firm’s culture and values, including the firm’s commitment to ethics, and compliance with independence requirements.
Discussion of how the firm defines audit quality and the ways in which it emphasizes quality in the performance of audit engagements.
Description of how the firm monitors audit quality and the results of internal and external inspections.
Recruiting, retention, and training of audit personnel, including commitment to workforce diversity.
The role of technology in auditing, including the use of artificial intelligence.
The firm’s view of future auditing challenges and how it intends to address them.
How the firm seeks to understand and incorporate into its practice the needs and interests of stakeholders, including whether and how the firm obtains independent input on governance or audit quality issues.
The firm’s governance structure, including identification of senior audit practice leadership.
For additional discussion of the typical content of this type of report, see CAQ’s Guide to Audit Quality Reports, April 2023 Update.
Performance Metrics
The reports also contain metrics -- quantitative data relevant to audit performance. Since the reports are not subject to any common standard or content requirements, these metrics are not consistent across firms. One of the reasons that the PCAOB adopted rules to require disclosure of certain firm and engagement performance metrics was to standardize these disclosures, although it is unclear whether the SEC will permit those rules to take effect. See PCAOB Adopts Pared Back Engagement Performance Metrics and Audit Firm Reporting Rules, November 2024 Update and SEC Sidetracks PCAOB Engagement Metrics and Firm Reporting Rules in this Update.
Although the reports are not standardized, some measures are common to most of the reports. Below is an overview of how the current reports present eight metrics. Figures are for a firm’s 2024 fiscal year, unless otherwise indicated.
PCAOB Inspection Results
PCAOB inspection reports are publicly available on the PCAOB’s website. See 2023 PCAOB Large Firm Inspection Reports, August 2024 Update. Each of the firm quality reports includes the number (or percent) of audits in Part I.A. of their most recent PCAOB inspection report – 2022 or 2023, depending on when the quality report was issued. (Part I.A. describes engagements that the PCAOB found to have one or more deficiencies of such significance that the firm had not obtained sufficient appropriate evidence to support the audit opinion).
BDO: “Our Part 1.A deficiency rates were 66% of 29 issuer audits inspected in 2022 and are expected to be higher in 2023, 53% of 30 issuer audits inspected in 2021, and 54% of 24 issuer audits inspected in 2020.” (2023 Audit Quality Report, page 67)
Deloitte: Seventy-nine percent of 56 audits inspected in 2023 inspection reports were without Part I.A findings. (2024 Audit Quality Report, pages 2 and 22)
Ernst & Young: In the 2023 PCAOB inspection cycle, 22 engagements (37 percent of audits inspected) had Part I.A findings. (Our Commitment to Audit Quality, page 28)
Grant Thornton: In Grant’s 2023 PCAOB inspection report, 53.6 percent of inspected audits were included in Part I.A. (Audit Quality and Transparency Report 2023, page 18)
KPMG: In KPMG’s 2023 PCAOB inspection report, the PCAOB found Part I.A. deficiencies in 26 percent of inspected engagements. KPMG anticipates that its 2024 inspection report will have a 20 percent deficiency rate, “our lowest deficiency rate since at least 2009.” (FY24 Audit Quality Report, pages 3, 7, and 11)
PwC: In PwC’s 2023 PCAOB inspection report, ten of 58 audits inspected were included in Part I.A. (2024 Audit Quality Report, page 5 and 45)
Use of Specialists
To address challenging or complex audit areas, firms typically assign personnel with specialized skills and knowledge to assist in assessing risk and designing and performing audit procedures.
BDO: Audit hours performed by IT and tax professionals and auditor-employed specialists – 15 percent. (2023 Audit Quality Report, page 9)
Deloitte: In FY2024, specialist hours were 17 percent of public company audit hours. Specialist hours are comprised of IT, tax, data analytics, valuation, and other. (2024 Audit Quality Report, pages 3 and 18)
Ernst & Young: Percentage of U.S. public company audit hours generated by EY U.S. professionals with specialized skills -- 18.8 percent. Specialist hours are comprised of IT, tax, valuation, and other. (Our Commitment to Audit Quality, page 4)
Grant Thornton: Information on specialist use not provided.
KPMG: “In FY24, specialist hours were up 10% relative to FY21, exceeding 2.3 million hours.” (FY24 Audit Quality Report, page 5)
PwC: Specialists provided 16.9 percent of audit hours. (This includes hours incurred by acceleration center audit team members that performed work under the direct supervision of the specialist. The report states that acceleration centers, which are in the US, India, Argentina, Mexico, Malaysia, and the Philippines, “represent a global talent pool of people who work seamlessly with other team members to complete audit procedures for both public and non-public audits.”) (2024 Audit Quality Report, pages 5 and 35; acceleration center described on page 19 and in footnote 10)
Restatements
The frequency with which financial statements on which the firm has expressed an opinion are subsequently restated is a common disclosure. Firms typically present this metric as the percentage of audited financial statements that were not restated.
BDO: Information on restatements not provided.
Deloitte: In FY 2024, 99.7 percent of issuer audit client (SEC registrants and registered investment companies) annual financial statements were not materially restated. There were five restatements. (2024 Audit Quality Report, page 20)
Ernst & Young: In FY 2024, 15 restatements were filed by issuers that EY audits. The percentage of issuer audit clients that restated was 0.5 percent. This data reflects restatements that SEC registrants (including registered investment companies) reported in SEC filings to correct material errors in previously issued annual financial statements. (Our Commitment to Audit Quality, page 26 and footnote 40)
Grant Thornton: Information on restatements not provided.
KPMG: “[W]hen looking at restatement rates across public audits, the firm continues to perform well, and we have the lowest material restatement rate among global network firms.” (FY24 Audit Quality Report, page 11)
PwC: Issuer audit client 2023 annual financial statements that were restated in subsequent years – 0.1 percent (1 restated). For 2022 and 2021 financial statements, the comparable figures were 0.3 percent (5 restated) and 0.5 percent (9 restated), respectively. (2024 Audit Quality Report, page 37)
Number of Audit Professionals
In their audit quality reports, firms typically present a range of statistics on workforce size and composition, often with an emphasis on diversity. The number of employees in the audit practice is a measure of audit practice size.
BDO: “[O]ver 3,700 U.S. assurance professionals.” (2023 Audit Quality Report, page 15)
Deloitte: Information on size of audit workforce not provided.
Ernst & Young: Number of U.S. audit professionals on a full-time equivalent basis --13,540. (Our Commitment to Audit Quality, pages 4 and 18).
Grant Thornton: In FY 2023, Grant had full-time equivalent audit/assurance personnel of 271 partners, 56 managing directors, 621 managers, and 1,845 associates. (Audit Quality and Transparency Report 2023, page 6)
KPMG: 9,684 total audit personnel (1,385 partners/managing directors; 2,341 senior managers/managers; and 5,958 senior associates/associates). (FY24 Audit Quality Report, page 18)
PwC: FY24 audit team members -- 16,235 (1,121 partners/managing directors, 2,565 directors/managers, 2,873 senior associates, 3,688 associates, and 5,988 acceleration center full-time equivalents. (2024 Audit Quality Report, page 19)
Leverage Ratio
The ratio of partners to staff is a measure of the availability of experienced, senior audit talent.
BDO: Ratio of principals to all other assurance professionals – 1 to 7.7. (2023 Audit Quality Report, page 8)
Deloitte: In FY 2024, the ratio of partners, principals, managing directors, senior managers, and managers to seniors and staff was 1 to 2.7. Partner, principal, managing director, and senior manager hours were 17 percent of public company audit hours. (2024 Audit Quality Report, page 18)
Ernst & Young: Fiscal 2024 ratios of partners and managing directors to staff through senior managers --1 to 8.8. (Our Commitment to Audit Quality, page 20)
Grant Thornton: FY 2023 ratio of partners to non-partners – 1 to 9 (Audit Quality and Transparency Report 2023, page 6)
KPMG: Information on the ratio of partners to staff not provided. The information described above on the number of audit professionals implies that the ratio of partners and managing directors to other audit professionals is 1 to 5.0 (2,341 senior managers/managers + 5,958 senior associates/associates ÷ 1,385 partners/managing directors)
PwC: The ratio of partners/managing directors to all other audit team members (including acceleration center FTEs) was 1 to 13.7; excluding acceleration centers, the ratio was 1 to 8.3. (2024 Audit Quality Report, pages 4 and 33)
Partners and Managing Directors Involved in Quality or Audit Oversight
Each firm assigns some partners and other senior personnel to provide oversight and guidance on issues relating to audit quality. The ratio of these professional practice or quality management partners to the total audit partner population is a data point regarding the firm’s audit quality resources.
BDO: Ratio of professional practice, quality management, inspections, and independence professionals to client-facing assurance professionals -- 1 to 17 (2023 Audit Quality Report, page 21)
Deloitte: FY 2024 ratio of partners, principals, and managing directors in technical roles to total PPMDs -- 1 to 10. (2024 Audit Quality Report, page 19)
Ernst & Young: Ratio of quality network and professional practice partners and managing directors to all audit and IT partners and managing directors – 1 to 6 (Our Commitment to Audit Quality, pages 4 and 24)
Grant Thornton: FY2023 ratio of direct client-serving partners/managing directors to national office support partners/managing directors – 4.86 to 1. Number of client-serving full-time equivalents to national office FTEs -- 21.04 to 1 (Audit Quality and Transparency Report 2023, page 13)
KPMG: Ratio of professional practice or quality management partners to the total audit partner population not provided.
PwC: The ratio of partner/managing directors serving in technical support roles to total partners/managing directors was 1 to 5.7. (2024 Audit Quality Report, pages 5 and 36)
Audit Staff Turnover
Audit firms typically experience turnover as personnel take advantage of the training and expertise gained in auditing to move to employment opportunities in other aspects of business and finance. Turnover can be an issue for audit quality since new hires may require training and may not initially be familiar with the clients to which they are assigned.
BDO: FY 2023 assurance practice retention rates: Principals and directors – 87 percent; managers – 85 percent; seniors and staff – 80 percent. (2023 Audit Quality Report, page 46)
Deloitte: FY 2024 voluntary turnover rate -- 12 percent. (2024 Audit Quality Report, page 26)
Ernst & Young: “Our retention at all ranks below partner (including managing directors) was 79%, 78% and 71% for fiscal 2024, 2023 and 2022, respectively.” In fiscal 2024, the overall retention rate of U.S. audit staff was 84 percent for senior managers and managers and 76 percent for seniors and staff. (Our Commitment to Audit Quality, page 18)
Grant Thornton: FY 2023 average annual retention rates by level: Managing director -- 93 percent; manager/senior manager/director -- 86 percent; senior associate – 74 percent; associate – 83 percent. (Audit Quality and Transparency Report 2023, page 7)
KPMG: The FY24 retention level was 87 percent for managers and 77 percent for associates. (FY24 Audit Quality Report, page 18)
PwC: The overall average annual voluntary turnover rate was 12.7 percent. By rank, the voluntary turnover rate was 11.3 percent for managing directors/directors/managers, 16.4 percent for senior associates, and 10.5 percent for associates. (2024 Audit Quality Report, page 4 and 25)
Continuing Professional Education
Professional education for audit staff personnel is an essential aspect of maintaining audit quality.
BDO: “Our assurance professionals’ average CPE hours for 2023 remains significantly higher than the minimum requirements and ranged from 57 to 87 average CPE hours depending on professional level.” (2023 Audit Quality Report, page 53)
Deloitte: 2024 average continuing education hours: Staff – 154; seniors – 145; managers/senior managers – 122; managing directors/partners – 82. Total continuing education hours were 2.6 million and average continuing education hours per person were 139. (2024 Audit Quality Report, page 27)
Ernst & Young: Fiscal 2024 average learning hours (including IT professionals who worked on audits) – 101. (Our Commitment to Audit Quality, page 21)
Grant Thornton: Average training hours by level in calendar year 2023: Partner, principal, managing director – 53; manager/senior manager/director – 72; senior associate – 65; associate – 66. (Audit Quality and Transparency Report 2023, page 15)
KPMG: Average FY24 CPE hours by job level: Associate – 94; senior associate – 40; manager – 59; senior manager/director – 52; managing director – 58; partner/principal – 58. (FY24 Audit Quality Report, page 20)
PwC: Each audit professional completed an average of 90 training hours. (2024 Audit Quality Report, pages 5 and 26)
Audit Committee Takeaways
These quality reports have become increasingly detailed and sophisticated. Audit committees should review their audit firm’s audit quality report as part of their evaluation of the firm’s performance and consideration of whether to continue to engage the firm. The reports may also serve as a basis for discussion among committee members and with the engagement partner regarding how the firm views audit quality and how its efforts to enhance quality may affect the company’s audit. Similarly, audit committees considering a new auditor should examine the quality reports of the competing firms. Although these reports provide a significant amount of useful information, they may be less effective for comparing firms due to differences in content and varying methodologies for computing metrics.