When reports begin to emerge on the latest inspection findings for the major audit firms, they will show no broad, appreciable improvements over the prior year.

That’s the word from representatives of the Public Company Accounting Oversight Board, who say some of the largest audit firms have “plateaued” in terms of reducing the number of adverse findings in regulatory inspections. “This plateau may call for a renewed focus on firms’ quality assurance systems from the top down,” said PCAOB member Jeanette Franzel at a recent national accounting conference.

Generally over the past few years, the leading audit firms have incrementally reduced the percentage of inspected audits that are found by inspectors to have deficiencies, and they’ve reduced the severity of the findings overall, said Franzel. In fact, among smaller firms that are inspected every three years, about half had no deficiencies in their inspection reports at all for the 2016 inspection cycle, which the PCAOB so far has described only in high-level summary reports and discussion.

The public so far has no view of those individual firm inspection findings, however, as the PCAOB has not yet published individual firm reports for the major firms since it published the results of 2015 inspections on 2014 financial statement audits in late 2016. Reports would normally be published in 2017 on inspections performed in 2016 on 2015 financial statement audits, but reports for none of the six largest audit firms have been released.

James Doty, chairman of the PCAOB, offered no particular explanation for why the board is so delayed in publishing 2016 report. "Sometimes excellence requires attention to detail," he said, referring to this year's report preparation as "a protracted process."

Drawing from her knowledge of what the reports will say, Franzel said across the system, “there are still firms that need significant improvement and others that are serious outliers. We’ve also found significant deficiencies and risks to audit quality across the global networks and in other cross-border audits.”

Firms need to focus on the preventive aspects of their quality control systems, said Franzel, building quality into the audit process and using detective monitoring techniques. Firms need to improve their focus on things like project management and monitoring, staff supervision, and tone throughout the organization, she said.

PCAOB staff is even exploring whether the PCAOB needs to upgrade its quality control standards, including those around the assignment and documentation of firm supervisory duties, Franzel said, to prompt firms to become more proactive in identifying and addressing their risks to audit failures.

Helen Munter, director of inspections and registrations at the PCAOB, said audit quality is heading in the right direction, but “we continue to see high rates of findings, which means that something is not working.” That suggests firms need to stop thinking in terms of correcting specific problems and instead explore systemic impediments to audit quality improvements.

“This means being more innovative in root cause analysis and focusing on long-term fixes,” she said. “The system of quality control must be able to identify and monitor risks, retain qualified staff and adapt to changing environments. Understanding whether controls exist, whether personnel understand those controls, whether they function properly and are well-integrated is vital to developing a strong environment that provides consistent quality audits, and will be a focus of our work.”