INSIGHT

PCAOB vs. AICPA Audits: What Companies Need to Know 

Jeff Dietrich, Dilys Xu, Will Tanem • December 24, 2025

Services: Technical Accounting

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Not all audits are created equal. For companies considering going public or engaging with public markets—whether through an IPO, acquisition, or merger—the difference between private company and public company audits is critical. While both AICPA and PCAOB audits share foundational principles, PCAOB audits introduce significant additional requirements in documentation, independence, and regulatory oversight.  

These enhancements result in a substantially higher level of rigor and scrutiny required to undergo a PCAOB audit—including private companies preparing to go public. Understanding these differences is crucial for effective budgeting, preparation, and risk management. Overlooking these distinctions can lead to costly delays, increased audit fees, and even reputational risk as your company transitions to the public sphere. 

The Basics: Who Does What? 

AICPA audits are designed for private companies and are conducted according to Generally Accepted Auditing Standards (GAAS) set by the American Institute of Certified Public Accountants (AICPA), providing assurance to stakeholders such as lenders and shareholders. By contrast, PCAOB audits are mandated for public companies and overseen by the Public Company Accounting Oversight Board (PCAOB)—a regulator established in the wake of the Sarbanes-Oxley Act (SOX) to protect investors and ensure the integrity of public financial reporting. 

While it might be tempting to think of a PCAOB audit as simply an “upgraded” AICPA audit, the reality is that the processes, scrutiny, and consequences are on a different level entirely. The shift affects every aspect of your audit experience—from documentation to independence requirements to regulatory oversight. 

Key Differences (From a Company’s Perspective) 

Scope and Depth 

The scope of an AICPA audit centers on providing reasonable assurance that the financial statements are free from material misstatement, giving auditors some flexibility in their approach. In contrast, PCAOB audits are not only deeper but also far more prescriptive. This is because PCAOB audits are designed to serve the interests of public investors and protect the integrity of capital markets, requiring auditors to adhere to stricter standards and deliver a broader scope of assurance than AICPA audits.  

Regardless of reliance on internal controls, PCAOB standards demand detailed substantive testing of significant audit areas. This leads to a more rigorous and extensive audit process than most private companies have previously experienced. For those accustomed to the private-company approach, the increase in expectations and scrutiny—often called “uplift”—can be substantial. This is not just an incremental step; it’s a transformation in the level of rigor and regulatory demand. 

Documentation, Sampling, and Review 

Documentation is one of the starkest areas of contrast. PCAOB audits require much more extensive and contemporaneous documentation. Companies often find themselves needing to revisit and expand prior supporting files, prepare detailed memos that meticulously assess US GAAP or IFRS, and ensure every key accounting judgment is fully substantiated with evidence. 

In many cases, key accounting conclusions that were reached under AICPA audits will be revisited as part of a PCAOB audit, as increased scrutiny is applied to complex transactions. While both AICPA and PCAOB standards permit statistical and non-statistical sampling using professional judgment, companies will notice the real difference lies in the heightened rigor and the volume of documentation required under PCAOB standards. Auditors may request re-performance or additional evidence for areas previously deemed sufficient, as PCAOB inspections drive a more exacting approach. 

Materiality thresholds are often set lower in PCAOB audits, meaning more transactions are subject to testing, and accounts or financial statement line items that were previously excluded may now be in scope. Moreover, PCAOB audits mandate a second partner review as part of their standard practice, further raising the bar for audit quality and consistency. As a result of this increased scrutiny, companies frequently need to redo or supplement documentation and procedures that were previously considered sufficient under AICPA standards. 

Independence and Permitted Services 

Independence is a critical issue for private companies preparing to go public. The PCAOB and the Securities and Exchange Commission (SEC) impose much stricter independence rules than the AICPA. Under AICPA standards, firms may provide certain non-audit services if management accepts responsibility and safeguards are implemented. 

Audit firms are barred from providing non-audit services such as bookkeeping, financial statement preparation, payroll, IT system design and implementation, valuation, actuarial services, internal audit outsourcing, legal, or expert services to their audit clients.  

Tax services are tightly restricted, particularly for executives in financial reporting oversight roles or involving the planning, marketing or opining in favor of confidential or aggressive tax strategies. The SEC’s affiliate definition is broader and captures a wider range of entities and individuals. 

As a public company, PCAOB and SEC independence requirements apply both prospectively and retrospectively to all financial periods included in your SEC filing. For IPO and SPAC transactions, the most recent full fiscal year’s audited financial statements and all subsequent unaudited interim periods must comply with these stricter standards; only earlier periods presented may follow AICPA independence rules together with the SEC’s general independence standard.  

For pre-IPO companies, a comprehensive independence review—looking at both the letter and the spirit of the rule—is essential early in the IPO process to prevent costly disruptions or regulatory scrutiny. 

Cost 

The increased rigor and scope of PCAOB audits come at a cost—sometimes a substantial one. For many companies, especially those undergoing this process for the first time, the transition can lead to inefficiencies as they navigate unfamiliar requirements and find themselves in need of external support. 

Companies making the transition should expect audit fees to be significantly higher: typically, 30–75% more expensive if SOX 404(b) internal control attestation does not apply, and up to two to five times higher if/when it does. In addition to the direct cost of the audit, companies need to budget for more staff time, greater internal involvement, and potential consulting or legal expenses in order to meet heightened compliance requirements. 

Reporting Differences 

PCAOB audit reports are generally more detailed and may include “Critical Audit Matters” (CAMs)—narratives that explain the most complex or high-risk areas of the audit and how the auditors addressed them. This level of transparency is not required in AICPA reports, which are typically shorter and do not include such disclosures. Addressing CAMs may require the involvement of technical accounting experts, particularly when dealing with complex estimates, revenue recognition, or valuation issues. This can lead to increased reliance on external advisors or specialized internal resources to ensure that the company’s positions are well-documented, defensible, and aligned with PCAOB expectations. 

Regulatory Oversight 

PCAOB and SEC rules require the public disclosure of identified control deficiencies that have been determined to be material weaknesses. In addition, the identification of errors can result in the restatement or revision of prior period financial statements. This can introduce both reputational and legal risk for public companies and result in any combination of the following – receipt of SEC comment letters, commencement of SEC enforcement actions, shareholder lawsuits, analyst downgrades or negative press. 

Unlike AICPA audits, which are subject only to periodic peer review by another accounting firm, PCAOB audits are inspected directly by the regulator. The results of these inspections, including any deficiencies, can be made public; however, the identities of the issuers subject to audit are not disclosed in PCAOB inspection reports. When an auditor fails a PCAOB inspection, additional audit procedures become necessary to ensure compliance with regulatory standards.  

This may involve revisiting previously completed audit work, gathering more extensive documentation, and performing supplemental testing in areas identified as deficient. These efforts result in increased time, cost, and resource allocation for the company, as well as potential disruptions to financial reporting timelines. Although rare, incremental audit efforts necessitated by the results of a PCAOB inspection may result in the identification of previously unidentified errors or control deficiencies.  

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Common Pain Points (and How to Prepare) 

Companies undergoing their first PCAOB audit quickly realize that they will face more frequent and detailed information requests, particularly concerning controls, estimates, and  documentation of accounting policies.  For private companies preparing to go public, PCAOB audits are often subject to much tighter timelines —driven by the IPO process.  

Once a registration statement is filed, the audit schedule is compressed by the need to respond to SEC comments (often within 30 days), take advantage of favorable market windows, and keep audited annual and quarterly reviewed interim financial statements sufficiently current under SEC rules. If too much time passes, additional audit work may be needed to update financials, adding pressure and complexity. 

These dynamics mean that recordkeeping must be organized year-round, and internal teams should be prepared to provide rapid, thorough responses to auditor requests. The pace and rigor of PCAOB audits in the pre-IPO context often catches private companies by surprise, making early preparation and ongoing readiness essential to avoiding costly delays or missed market opportunities. Auditors will also require robust evidence for all key assertions and will not simply accept management explanations.  

In many cases, companies ultimately realize that their existing accounting infrastructure and personnel may not be fully equipped to meet the heightened scrutiny and accelerated pace necessary to meet tightened deadlines. The level of technical depth and documentation required can expose gaps in internal capabilities—particularly around complex areas like revenue recognition, stock-based compensation, or fair value measurements.  

Sometimes, companies are unaware of the level of sophistication needed until they are deep into the audit process, leading to last-minute scrambles for external advisors or technical accounting experts.   
 

Bottom Line 

Transitioning from an AICPA audit to a PCAOB audit is not just a regulatory box to check—it’s a fundamental transformation in process, rigor, and expectation. Companies that approach this proactively—by strengthening documentation, reviewing independence, and dedicating sufficient resources— will be much better positioned for a smooth and successful transition to public company status.  

That’s where BPM comes in.  

If you need advisory support to prepare for PCAOB audits: As a specialized group within BPM, our Technical Accounting Group (TAG) is composed of highly experienced professionals who guide companies through their most complex accounting and compliance challenges. TAG’s deep expertise in SEC filings, IPO readiness, and PCAOB audit preparation ensures that clients not only meet but exceed regulatory expectations.  

Early preparation isn’t just smart; it’s essential for safeguarding your company’s reputation and keeping your path to the public markets on track. TAG helps you get audit ready—addressing complex revenue, leases, and equity topics; sharpening SAB/SEC disclosures; aligning internal controls (SOX 404); and building robust audit packages. 

If you need auditors to execute under PCAOB standards: BPM’s PCAOB audit practice is comprised of skilled professionals with the necessary acumen to navigate the challenging regulatory environment and deliver rigorous, efficient audits to support your IPO or public company journey.