PCAOB’s focus on audit quality

Acting Chair Botic described how the Board’s global inspection program helps identify and address risks in audit engagements, while ongoing standard-setting ensures that firms are held to rigorous, up-to-date requirements – such as those for internal controls and quality control systems. He believes the third pillar, transparency, is advanced through initiatives like Form AP and critical audit matters (CAMs), which provide investors and market participants with deeper insights into the audit process and the judgments auditors make.

Botic also echoed remarks by SEC Chief Accountant Kurt Hohl on Day 1, discussing the challenges and opportunities posed by private equity investments in audit firms and AI on the profession, and reinforced the PCAOB’s commitment to investor protection.

As the year-end audit season approaches, Botic emphasized several key imperatives for auditors: maintaining independence, carefully evaluating the presence of CAMs, and fostering a leadership-driven culture that encourages individuals to voice concerns and prioritizes audit quality above meeting deadlines.

As we navigate an evolving audit landscape – shaped by shifting global risks and rapidly evolving technologies – our unwavering commitment must remain anchored in investor protection and transparent communication. True audit quality isn't just about compliance or meeting deadlines; it's cultivating a culture where ethical leadership, independent judgment and open dialogue empower us to anticipate challenges and build enduring trust in our markets.

Doug Besch

KPMG Chief Auditor

Christine Gunia, Director of the Division of Registration and Inspection (DRI), previewed the 2025 inspection results, noting that the preliminary data indicates that PCAOB inspection results have improved across firms of all sizes.

Amongst others, Christine highlighted the following best practices that DRI observed in their inspections.

Leadership and culture: Firms with a strong tone at the top and a culture that prioritizes audit quality and ethics – supported by robust systems of quality control – are more likely to achieve high-quality audits.
Specialist involvement: High-quality audits feature specialists engaged throughout the process, so that complex areas are addressed with the right expertise.
Tailored risk assessment: Leading audit teams tailor their risk assessments to the specific business and industry, and even at the transaction level – resulting in more relevant and effective audit procedures.

Learn more about Audit Quality at KPMG in our Audit Quality and Transparency Reports.

The PCAOB continues to prioritize enforcement actions to protect investors and uphold audit integrity. In 2025, the Board’s Division of Enforcement and Investigations focused on significant audit failures, independence violations, interference with board processes and quality control deficiencies. The Board’s approach remains consistent: targeting serious misconduct and reinforcing the importance of professional skepticism and accountability across the profession.

AI clearly has the potential to dramatically transform the audit profession, with a significant number of firms – as well as the issuers they audit – already using or planning to use GenAI. Read our Day 1 reporting on the latest developments in AI implementation.

For Botic, the PCAOB’s task is closely monitoring the opportunities and challenges this technology presents so that professional judgment and skepticism remain at the core of the audit. He cautioned that overreliance on technology could erode critical thinking and auditor independence.

At KPMG, we are harnessing technology to perform advanced analyses on large datasets – unlocking insights that were previously out of reach. This empowers our people to focus their expertise on complex judgments, risks and anomalies, which is fundamental to enhancing audit quality.

Keith Hooper

KPMG Partner, Department of Professional Practice

More about the PCAOB’s projects

Barbara Vanich, PCAOB Chief Auditor, updated conference attendees on the PCAOB’s standard-setting activities.

Quality control (QC). The standard introduces a risk-based approach suitable for firms of various sizes and complexities, while requiring each QC system to be rigorously designed, implemented and operated. The effective date of the standard was delayed a year due to feedback from firms that needed more time and support prior to implementation, with a new effective date of December 15, 2026. The PCAOB has hosted workshops, released implementation materials and staff presentations. These and other materials can be found here.
Technology-assisted audit procedures. These amendments update PCAOB auditing standards to more specifically address audit procedures performed using technology-based tools. Vanich discussed additional guidance that was provided to assist auditors with applying a risk-based approach to testing external information. Read more about the standard here. The amendments are effective for audits of fiscal years beginning on or after December 15, 2025.

Footnote:

2025 AICPA Conference on Current SEC and PCAOB Developments

KPMG Private

Relevant Results

Inspection observations: Audit quality enhancements

Enforcement: Continued focus on serious misconduct

The AI revolution and its effect on the audit

More about the PCAOB’s projects

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