Public oversight of statutory auditors is necessary: it is required by European Union law and by the interests of market participants. Yet research among auditors and inspection data reveal phenomena that work against audit quality — that is, against the very thing oversight is meant to protect. In this article we describe three of them: an inspection outcome close to one hundred per cent, the chilling effect, and the human cost of proceedings.
Deficiencies in almost one hundred per cent of files
In 2025 inspections found deficiencies in 41 of the 42 audit files of public-interest entities (PIEs) inspected and in 225 of the 229 files of other audits — 266 of 271 files in total (98%). By comparison, according to data from the International Forum of Independent Audit Regulators (IFIAR), findings are made in about 35% of inspections of audits of listed companies. The comparison is approximate, because IFIAR and PANA count findings according to different definitions, but the scale of the difference is telling. In the non-PIE segment, the number of deficiencies per audit file has risen by 32% since 2021, from 3.98 to 5.25.
Source: PANA reports, own compilation.
In none of these years did the share of files with deficiencies fall below 85%, and in 2024 deficiencies were found in all 272 files inspected.
Number of deficiencies per inspected audit file
| Segment | 2021 | 2025 | Change |
|---|---|---|---|
| PIE | 4.47 | 4.14 | −7% |
| Other audits (non-PIE) | 3.98 | 5.25 | +32% |
| Total | 4.13 | 5.08 | +23% |
Source: PANA reports, own compilation.
Files are selected for inspection on the basis of risk, so a high share is not surprising. In itself, however, it does not prove that the selection is accurate. With purposive selection it is impossible to tell to what extent the result reflects the effectiveness of the selection and to what extent the actual frequency of deficiencies. A result close to one hundred per cent no longer distinguishes a sound audit from an unsound one: if almost all files come out the same, the measure no longer differentiates. If almost every audit is defective, then either the profession as a whole cannot audit, or the measure has stopped measuring quality. A thesis that no result can refute is not a finding but an assumption.
Marcus Aurelius remembered with gratitude a teacher who, when correcting someone else’s mistake, did not point it out “in a reproachful way”, but preferred “joining in an inquiry about the thing itself, not about the word”. The same distinction separates an assessment of how an audit was carried out from an assessment of the form of its documentation.
The chilling effect
The chilling effect is refraining from lawful conduct for fear of a sanction. The foundation’s research shows that it works through two channels.
The first channel is emotional: fear of inspection translates into defensive behaviour. About 70% of the effect of perceived oversight on defensive auditing passes through anxiety.
The second channel is normative and social: auditors stop speaking publicly about oversight, even though in private they talk about it openly. Anyone who writes about oversight knows this. An article is read by hundreds of people, almost nobody reacts publicly, and the thanks come by telephone. Sociology calls this the spiral of silence. For an oversight system it is an information problem: an authority that does not hear criticism loses a source of information about its own mistakes.
A Roman emperor saw this long ago and wrote in his notes: “If any man is able to convince me and show me that I do not think or act right, I will gladly change; for I seek the truth, by which no man was ever injured.” Openness to criticism does not weaken authority. It gives it knowledge it cannot gain in any other way.
The foundation is conducting a study of auditors’ anxiety and of the impact of inspections on their mental health and professional activity. We will publish the results once the study is complete.
The human cost
An inspection does not end at the office. Months of tension, followed by years of proceedings, take a toll on health, on family and on the decision whether to stay in the profession.
In their open-ended answers, auditors describe problems that fall along two axes. The first is the lack of an effective appeal and the belief that a court will not assess the dispute on its merits. The second consists of the procedural flaws in inspections that they describe and the lack of dialogue.
We are examining the scale of these effects in the study described above, and alongside legal assistance we are developing psychological support.
Proposals
All three phenomena relate to the foundation’s proposals in the areas of a fair measure, a fair procedure and the person in the inspection.