EY's AuditClean Up

 from WSJ 10/1/2025

posted 21/18/2025

 

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• The firm had a net loss of 101 public-company audit clients between Jan. 1, 2023, and June 30, 2025, in part a bid to improve audit quality.

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• Ernst & Young anticipates its U.S. auditing deficiency rate will be at or below 9% this year, the lowest in 16 years.

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Ernst & Young expects to achieve its lowest U.S. auditing shortfall rate in 16 years after working to improve its practices by shedding dozens of audit clients, setting up centralized support teams and relying more on tech tools.

Auditing deficiencies are expected to be at or below 9% this year for EY as the Public Company Accounting Oversight Board wraps up its inspections process for the Big Four accounting firms, people familiar with the matter said. 

EY has chipped away at the rate from 46% in 2022, then 37% and 28% in 2023 and 2024, respectively. The firm had the highest deficiency rate among the Big Four—which also includes Deloitte, PricewaterhouseCoopers and KPMG—in the U.S. in those three years. EY’s 2025 standing among peers is unknown as the other three firms haven’t disclosed their deficiency rates yet.

The PCAOB is expected to issue its inspection findings in the coming months. PwC said it is seeing “meaningful improvement” over its 2024 results, which saw a 16% deficiency rate.

EY on Wednesday is set to release a report stating that it anticipates its deficiency rate will fall below 10%. 

EY said its continuing investments in technology and retaining and training its workforce have been key to shrinking the deficiencies in its audits. The firm last year said it planned to invest $1 billion through 2027 in part to strengthen AI-enabled audit and tax platforms and boost U.S. early-career compensation.

“We expect technology to continue to support our teams in terms of the quality of the work they do, but also how they do the work and the insights they’re able to glean from the work,” said Dante D’Egidio, EY’s Americas vice chair for assurance. 

Audit revamp

The PCAOB’s findings led EY to improve the quality of its U.S. audit work, which centered on standardizing its approach and building centralized teams to provide audit support. The firm in 2023 said it was also enhancing portions of its audit methodology and tools and refreshing its approach to improve training. 

The revamp has included cutting ties with many U.S. public companies as audit clients, as The Wall Street Journal reported last year. EY had a net loss of 101 public-company audit clients between Jan. 1, 2023, and June 30, 2025, including 132 departures, according to data from research firm Ideagen. Deloitte, KPMG and PwC had net gains of 61, 43 and nine, respectively, in that period.

“We made an intentional decision to reduce the number of audit clients in our portfolio in order to accelerate improvements to the audit and drive sustainable audit quality,” D’Egidio said. 

The frequency of EY public-company audit client losses is unlikely to persist, D’Egidio said.

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Public companies generally switch auditors either to pay lower fees or because they have gone private, been acquired or outgrown the capabilities of the original firm. Audit firms also can drop clients, particularly if they have become overly risky or serving them presents a conflict of interest.

Deloitte led market share in U.S. public-company auditing in 2024, succeeding EY, which had been No. 1 for at least a decade, according to Ideagen data based on the number of audit reports. 

“Client numbers alone don’t capture growth,” D’Egidio said.

Ernst & Young anticipates its U.S. auditing deficiency rate will be at or below 9% this year, the lowest in 16 years.

AI moves

EY auditors are increasingly using AI to improve the consistency and efficiency of their work. AI automation frees up auditors to focus more on exercising judgment and professional skepticism, often a reason “why they joined the profession in the first place,” said Richard Jackson, EY’s global and Americas assurance AI leader.

The firm adopted several new AI auditing tools in the spring, meaning those changes would be reviewed in next year’s inspections, Jackson said. 

The tools allow auditors to translate a client IT system’s program code into plain English and to quickly research accounting questions. AI also automates certain procedures such as validating calculations and identifying inconsistencies that require follow-up.

“Some of these financial statements can run to hundreds of pages, so the ability to inject those with AI capabilities and turn effort that used to take literally hours into minutes is just something that improves the quality of that,” Jackson said. 

Inspections

Audit deficiencies for the six large U.S. audit firms—the Big Four, BDO and Grant Thornton—appear to be down compared with the previous year, the PCAOB’s acting chair, George Botic, said last week, citing preliminary results of the latest inspections.

Big Four auditing shortfalls lessened in 2024 inspections, the reports for which were released in March, following two years of then-PCAOB Chair Erica Williams calling the results unacceptable.

Williams has said improved results are a sign of the PCAOB’s efforts to push firms to address their greater deficiencies coming out of the pandemic. Williams resigned in July at Securities and Exchange Commission Chair Paul Atkins’s request. 

Critics of the PCAOB have argued that the inspections too often count minor errors as auditing shortcomings, inflating the percentage. 

The PCAOB can’t begin its inspection of any given registered accounting firm until its auditors have put together a final set of audit documentation, a task that has to be done as close as possible to the end of a particular audit. The PCAOB’s inspection teams select certain completed audits conducted by a firm for review.

Write to Mark Maurer at mark.maurer@wsj.com

AI moves

EY auditors are increasingly using AI to improve the consistency and efficiency of their work. AI automation frees up auditors to focus more on exercising judgment and professional skepticism, often a reason “why they joined the profession in the first place,” said Richard Jackson, EY’s global and Americas assurance AI leader.

The firm adopted several new AI auditing tools in the spring, meaning those changes would be reviewed in next year’s inspections, Jackson said. 

The tools allow auditors to translate a client IT system’s program code into plain English and to quickly research accounting questions. AI also automates certain procedures such as validating calculations and identifying inconsistencies that require follow-up.

“Some of these financial statements can run to hundreds of pages, so the ability to inject those with AI capabilities and turn effort that used to take literally hours into minutes is just something that improves the quality of that,” Jackson said. 

Inspections

Audit deficiencies for the six large U.S. audit firms—the Big Four, BDO and Grant Thornton—appear to be down compared with the previous year, the PCAOB’s acting chair, George Botic, said last week, citing preliminary results of the latest inspections.

Big Four auditing shortfalls lessened in 2024 inspections, the reports for which were released in March, following two years of then-PCAOB Chair Erica Williams calling the results unacceptable.

Williams has said improved results are a sign of the PCAOB’s efforts to push firms to address their greater deficiencies coming out of the pandemic. Williams resigned in July at Securities and Exchange Commission Chair Paul Atkins’s request. 

Critics of the PCAOB have argued that the inspections too often count minor errors as auditing shortcomings, inflating the percentage. 

The PCAOB can’t begin its inspection of any given registered accounting firm until its auditors have put together a final set of audit documentation, a task that has to be done as close as possible to the end of a particular audit. The PCAOB’s inspection teams select certain completed audits conducted by a firm for review.

Write to Mark Maurer at mark.maurer@wsj.com

AI moves

EY auditors are increasingly using AI to improve the consistency and efficiency of their work. AI automation frees up auditors to focus more on exercising judgment and professional skepticism, often a reason “why they joined the profession in the first place,” said Richard Jackson, EY’s global and Americas assurance AI leader.

The firm adopted several new AI auditing tools in the spring, meaning those changes would be reviewed in next year’s inspections, Jackson said. 

The tools allow auditors to translate a client IT system’s program code into plain English and to quickly research accounting questions. AI also automates certain procedures such as validating calculations and identifying inconsistencies that require follow-up.

“Some of these financial statements can run to hundreds of pages, so the ability to inject those with AI capabilities and turn effort that used to take literally hours into minutes is just something that improves the quality of that,” Jackson said. 

Inspections

Audit deficiencies for the six large U.S. audit firms—the Big Four, BDO and Grant Thornton—appear to be down compared with the previous year, the PCAOB’s acting chair, George Botic, said last week, citing preliminary results of the latest inspections.

Big Four auditing shortfalls lessened in 2024 inspections, the reports for which were released in March, following two years of then-PCAOB Chair Erica Williams calling the results unacceptable.

Williams has said improved results are a sign of the PCAOB’s efforts to push firms to address their greater deficiencies coming out of the pandemic. Williams resigned in July at Securities and Exchange Commission Chair Paul Atkins’s request. 

Critics of the PCAOB have argued that the inspections too often count minor errors as auditing shortcomings, inflating the percentage. 

The PCAOB can’t begin its inspection of any given registered accounting firm until its auditors have put together a final set of audit documentation, a task that has to be done as close as possible to the end of a particular audit. The PCAOB’s inspection teams select certain completed audits conducted by a firm for review.

Write to Mark Maurer at mark.maurer@wsj.com

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The firm reduced its deficiency rate from 46% in 2022 to an expected 9% in 2025 through practice improvements.