The Public Company Accounting Oversight Board (PCAOB) criticized Ernst & Young LLP for failing to address quality control (QC) problems found during an audit inspection. This is the fourth consecutive time that the inspections team has identified QC deficiencies.
The latest criticisms appear in a report made public on October 1, 2026, and the findings are based on the 2021 inspection cycle. The previous criticisms stem from 2020, 2019, and 2018 inspections.
The PCAOB’s standard practice is to publish inspection reports but keep confidential the portion that covers weaknesses with an audit firm’s quality management and supervision. If the firm fails to address the problems within 12 months, the PCAOB makes public the QC findings. The process takes a long time as firms negotiate with the supervisory board about the fixes or remedial efforts made.
It is unusual for a firm to be faulted for the same QC problems for four years in a row: EY’s policies for financial holdings disclosures.
The Big Four firm did not immediately respond to a request for comment.
To be fair, EY is not the only Big Four firm being dinged for QC problems for consecutive years for the same independence matters. For example, Deloitte & Touche LLP was also criticized four times in a row.
“The inspection results indicate that the firm’s system of quality control does not provide reasonable assurance that the firm and its personnel will comply with the firm’s policies and procedures with respect to independence-related regulatory requirements,” the PCAOB’s inspection report on EY states.
EY periodically audits a sample of its personnel to monitor compliance with its independence policies. In the audits conducted during the 12-month period ended March 31, 2021, the firm identified that 22% of the managers had not reported required financial relationships.
“This high rate of non-compliance with the firm’s policies, which are designed to provide compliance with applicable independence regulatory requirements, provides cause for concern, especially considering that these individuals are required to certify on a quarterly basis that they have complied with the firm’s independence policies and procedures,” the report says.
The rate of noncompliance in the samples has been improving, however.
In the sample audit during the 12-month period ended March 31, 2020, EY found that 26% of the managers had not reported financial relationships.
The firm identified that 32% percent of the managers who were audited had not reported financial relationships in 2019. That rate was a drop from 2018 when it was 46%. The 2018 inspection also noted that 33 percent of the partners did not comply.
It is unclear whether the PCAOB will find continued QC deficiency in financial holding disclosures in the 2022 inspections.
However, the firm’s overall audit quality – based on PCAOB’s findings – has been showing improvement.
In the most recent inspection report issued in August, the deficiency rate for Part I.A was 5%. This portion of the inspection report identifies deficiencies where the auditor did not obtain sufficient and appropriate audit evidence to support its opinion on the company’s financial statements and internal control over financial reporting (ICFR).
The three-year inspection results for EY show significant improvement in 2025 when its rate plummeted to 5% from 28% in 2024 and 37% in 2023.
EY’s audit quality report, published in September, says that the firm expects “to sustain high audit quality and low PCAOB findings.”
It must be noted that the PCAOB does not inspect all audits. Many audits are selected based on risk assessment. This means that inspectors will look at audits where problems are likely to occur because of the complexity of audits. The board also selects some audits randomly to better gauge how well firms are complying with PCAOB standards and rules.
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