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Financial and commercial audits are good work for the CPA firms that do them well. Lender-required engagements, private equity portfolio audits, owner-managed business financial statement audits. These engagements generate meaningful fees, deepen client relationships, and position your firm as a trusted advisor beyond tax season.
The harder question is whether your firm is currently equipped to do this work in a way that holds up. Under PCAOB inspection if you have public company clients, under peer review, and under a client's expectations when they are presenting audited financials to a bank or investor.
The PCAOB's 2024 inspection data makes this worth examining honestly: 61% of audits reviewed at triennially inspected firms had major deficiencies. That is not a small number.
This blog examines the real pros and cons of maintaining a financial audit practice at different volume levels, where the risk concentrates, and when a structured delivery partner makes more sense than hiring your way through it.
There are genuine reasons CPA firms have built and maintained audit practices. The business case is real with important qualifications.
When a client grows large enough to need a financial statement audit for a lender, for a private equity transaction, for a regulatory filing. They call their existing CPA first. Keeping that work in-house deepens the relationship and makes the firm harder to replace. A client who uses you for tax, advisory, and audit is not shopping the market every year. A client who uses you for tax and goes elsewhere for audit has one foot out the door.
This is a real retention argument. The qualification, as always, is whether the audit work your team delivers is strong enough to protect the relationship rather than expose it.
Audit season for private company financial statement audits runs primarily from January through June, with some overlap into Q3. For firms that are tax-heavy, the audit practice provides revenue during the months when the tax calendar is quieter. The timing appeal is genuine, audit work fills the gap that exists between May and December for many practices.
The practical qualification: an audit engagement that takes longer than it should because the team is unfamiliar with the client's industry or the specific audit procedures required is not filling that gap profitably. If an engagement that should take 80 hours is taking 140, the off-season revenue argument disappears into write-offs.
The number of CPA firms with active audit practices has been declining. Firms that exit audit work create capacity for the firms that remain. There is a legitimate argument that staying in the audit business as others leave creates market opportunity. Particularly in geographic markets where the remaining options are the Big Four and a few regional firms.
The qualification is the same one that applies to EBP audits: the opportunity only benefits firms whose audit quality holds up under scrutiny. Fewer competitors does not help if your deficiency rate puts you in the PCAOB's 61% category.
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Here is where the financial audit practice becomes difficult to maintain at small to mid-sized firms, not in theory, but in the inspection results and the write-offs.
For firms that audit public company clients, PCAOB inspection is not optional. The 2024 inspection cycle reviewed over 800 public company audits across 171 firms. The aggregate deficiency rate across all firms was 39%, down from 46% in 2023, but still representing nearly 4 in 10 audits with major deficiencies.
For triennially inspected firms — the category covering most small to mid-sized CPA practices — the deficiency rate was 61% in 2024. The most common deficiency areas were Other Investments, Allowance for Credit Losses, and Equity-Related Transactions. These are not exotic audit areas. They are standard financial statement line items where the testing was insufficient.
A PCAOB inspection finding does not stay in the report. It affects client retention, recruiting, and in serious cases, the firm's ability to practice in certain markets. Firms that receive repeated deficiency findings face escalating scrutiny and, in some cases, consent orders.
Like EBP audits, financial statement audits for owner-managed businesses and small private companies are viewed by clients as a required cost, not a value-add. Price sensitivity is high. Clients compare proposals. Without efficient processes and appropriately staffed teams, firms spend significantly more time on these engagements than they bill and the hours that disappear into write-offs are hours that could have gone to higher-margin work.
The firms that make audit work profitable are the ones with systematic processes: standardized workpaper templates, trained staff who know what a complete audit file looks like, and reviewers who spend their time reviewing rather than reconstructing. Building that infrastructure takes volume and investment. Maintaining it takes ongoing staff development. For firms doing three or four financial statement audits a year, the math rarely works.
A profitable audit practice runs on leverage. Staff handle fieldwork, seniors lead engagements, managers review, partners sign off. That structure works when there are enough trained audit staff. When the talent shortage removed the bottom of that pyramid and audit-trained staff are among the hardest to find and retain, the work moved up. Seniors started doing staff work. Partners started spending time on files they should only have been reviewing.
Partners spending 60 hours on an audit engagement that should have required 10 hours of their time are not running a profitable audit practice. They are running an expensive one and absorbing the difference in write-offs and exhaustion.
Maintaining a credible financial audit practice requires ongoing CPE, current access to audit methodology guidance, investment in audit technology (Caseware, AuditBoard, CCH ProSystem), and a quality control function that can catch deficiencies before the PCAOB or a peer reviewer does. For firms doing eight to ten audits a year, the cost of that infrastructure per engagement is difficult to absorb.
The PCAOB has noted that the improvements among the largest firms in 2024 were driven by four things: more in-person training, stronger national office resources, better supervision and review, and more in-person team collaboration. Every one of these requires capacity and investment. A stretched team cannot implement any of them consistently.
A clean peer review is not the same as a clean PCAOB inspection. Firms should not assume that passing peer review means their audit work would hold up under direct regulatory scrutiny.
Audit software has improved significantly. Caseware, AuditBoard, and similar platforms automate data ingestion, flag anomalies, and streamline workpaper organization. For firms with trained teams, these tools are genuine productivity multipliers.
For firms whose underlying audit expertise is thin, technology creates a different risk: it produces organized-looking audit files that may not reflect sufficient testing of the right areas. The PCAOB's deficiency findings are not about workpaper organization. They are about whether the auditor obtained sufficient appropriate evidence to support their opinion. Software does not make that judgment. A trained auditor does.
The pattern here is familiar. When you examine the pros and cons of maintaining a financial audit practice at low to moderate volume, the pros are real but qualified, and the cons concentrate around quality, margin, and inspection exposure. The question is the same one small EBP audit practices face: is retaining the audit work the same as retaining the client?
It does not have to be. CPA firms that have structured their audit delivery through a backend partner report two consistent outcomes: cleaner workpapers and more capacity to take on engagements they were previously turning away. The client relationship stays with the originating firm. The execution — fieldwork, workpaper preparation, substantive testing is handled by a team doing this work at volume, where the institutional knowledge that produces clean audits actually develops.
MYCPE ONE has been working with CPA and accounting firms for over 10 years. 200+ partner firms, 3,000+ professionals across 40+ offices in two countries, 10,000+ clients supported. The audit support team works across Caseware, AuditBoard, CCH ProSystem, and the tools firms already use. The scale that produces clean audits, volume, repetition, dedicated teams — is already built.
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Financial and commercial audits are worth doing. They deepen client relationships, generate off-peak revenue, and position your firm as a full-service practice. The question is whether your current delivery model is equipped to do them at the quality level that protects those benefits and whether the cost of maintaining that quality in-house at low to moderate volume is worth it relative to what a structured partner arrangement would look like.
The PCAOB is not grading on a curve for smaller firms. A 61% deficiency rate at triennially inspected practices means that more than half of reviewed audits had material problems. That is the environment your audit practice is operating in. The decision about how to staff and structure the work deserves the same honest analysis you would give any other high-risk, margin-sensitive service line.
There is no universal threshold, but the infrastructure cost — audit methodology, software, CPE, quality control — typically needs to spread across at least 15-20 engagements per year to be economically sound. Below that, the per-engagement cost of maintaining quality rarely supports the fee structure.
Christopher is the Director of Client Relations and Business Development at MYCPE ONE, a leader known for his energy and people-first approach. Chris leads from the front mentoring teams, driving growth, and building lasting client relationships. With over a decade of experience in sales, coaching, and business strategy, he has helped 5,000 CPAs nationwide overcome challenges and discover new opportunities. Chris is a familiar presence at major accounting conferences, representing MYCPE ONE and shaping meaningful industry partnerships. Passionate about leadership and professional growth, he continues to inspire teams and professionals to reach their highest potential.
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