US accounting firms expect fewer audit inspections as the Securities and Exchange Commission (SEC) signals plans to overhaul supervision of the accounting industry, reported Financial Times.

The regulator has said it intends to place greater weight on oversight of firms’ internal quality and control systems.

This shift has encouraged accounting firms to press for changes to an inspection framework they say has increasingly concentrated on minor audit issues.

Audit inspections are carried out by the Public Company Accounting Oversight Board (PCAOB), which operates under SEC oversight.

The PCAOB reviews dozens of audits undertaken by large firms each year and publishes reports outlining deficiencies identified in specific engagements.

Among the big four firms – EY, KPMG, Deloitte and PwC – the PCAOB reviewed 63 or 64 audits last year, compared with 53 or 54 two years earlier.

The watchdog’s so-called deficiency rate, which it has used as a measure of audit quality, climbed sharply following the Covid pandemic but has fallen over the past two years.

Accounting firms have argued privately that the earlier rise was partly driven by inspectors highlighting relatively minor shortcomings that would not previously have resulted in sanctions.

The PCAOB was set up more than 20 years ago in the aftermath of the Enron scandal to establish audit standards for US-listed companies and to monitor compliance by accounting firms.

Although Congress requires inspections to take place, the legislation does not mandate a minimum number.

Kurt Hohl, the SEC’s chief accountant, said at an industry conference earlier this month that reforming the inspection process was “overdue”, citing changes to the standards governing firms’ quality control systems.

George Botic, acting chair of the PCAOB since July, said the organisation should move carefully when updating its inspection programme and consult investors and other stakeholders.

He warned that limiting the publication of inspection findings “runs the risk of losing something that I think the PCAOB’s reputation, and the capital markets have benefited from extensively over two-plus decades”.

Botic added that individual audit inspections would still be necessary to test whether quality management systems function effectively in practice.

Christina Ho, a PCAOB board member who has backed accounting firms in recent policy debates, said she expected the overall number of audit inspections to decline under the SEC’s revised approach.