The One-Person Audit Firm Is Coming
Audit fees at the largest companies on the London Stock Exchange jumped 75% between 2019 and 2023. Last year, they rose less than 2%.
That’s about the inflation rate. For a profession that has raised prices 4% to 5% every year like clockwork, it’s a break in the pattern.
The Financial Times credits AI. I think they’re right. And I think the fee slowdown is the first visible crack in a much bigger shift.
The old pricing playbook came with easy excuses like tighter regulation and too few CPAs to go around.
When clients have to buy your product and your competitors can’t hire enough people to undercut you, a price increase is an easy way to grow margins.
That playbook just stopped working.
A former PCAOB board member signed her first AI audit report
On Episode 506 of The Accounting Podcast, we talked about Christina Ho's next act. Christina is the former PCAOB board member I interviewed on the Earmark Podcast. She built a reputation as the board's most willing dissenter.
She joined Oath, a startup that works as both a software platform and a licensed CPA firm. She helps build the technology and audit methodology.
She just signed her first report and plans to sign an audit opinion later this month.
The model flips traditional audit upside down. Instead of testing a small sample once a year, Oath connects directly to client systems, tests 100% of the data, and verifies records alongside the monthly close.
Think about what that does to the worst part of the job. Audit is painful because firms cram a year of work into a few months (sometimes a few weeks).
Spread that work across 12 monthly closes and busy season disappears.
Saying "AI can't replace professional judgment" misses the point.
Most audit hours have little to do with judgment. We spend them on routine procedures performed the same way every time, with a small dose of judgment mixed in.
That small dose is why rules-based software never automated audit. AI can handle it.
The usual objection is reliability. AI is probabilistic, so it makes mistakes a careful human wouldn't.
Fair enough. But a human team tests a sample, and AI tests everything. Full-population testing, with a human reviewing exceptions and signing off on the opinion, should beat an overworked team checking a sliver of transactions.
We've seen this movie before
I started my firm about 15 years ago, when traditional firms still paid human bookkeepers to key in transactions by hand. Using cloud tools, I cut the labor cost by a factor of five.
Most of an accounting firm’s margin goes to labor. Cut the hours, and you can charge less and make more.
That's how cloud-first firms took market share. Friends of the podcast built practices from nothing into firms valued at $100 million or more over 10 to 20 years.
Audit missed that wave.
The technology that transformed client accounting services didn't apply to audit work. As David pointed out, cloud accounting made bookkeeping far more efficient, so AI adds a smaller bump there.
But audit has seen almost no innovation in decades, which means it has the most to gain.
How I think the market shakes out is the Big Four keep the multinationals. Those audits span multiple entities and still depend on people and relationships.
Everyone below them gets squeezed from underneath.
Small, tech-driven firms take midsize audits from regional firms. Solo CPAs take work from small firms.
That last group interests me most.
Picture a CPA running a team of AI agents, each with a defined role, working inside software built on a rigorous methodology. The agents do the fieldwork and bring questions to the CPA, who acts as engagement partner.
With enough insurance and a system you trust, one person could sign an opinion every week while working a couple of hours a day.
We already know what a tiny firm signing a mountain of opinions looks like. BF Borgers did it with fabricated work. Now you can do it with real audits.
Lower prices could also grow the market. Plenty of smaller companies settle for a compilation or review because an audit costs too much, even when an audit would help them raise money.
Cut the price and some of them will buy.
What to do about it
If you run an audit practice, you can't count on price increases anymore. Your cost structure is the only thing left to work on. Start by mapping which procedures are routine, low-judgment work, and test AI on those first.
If you're a CPA who assumed audit was off-limits without a big team, take another look.
Anyone who launched a cloud client accounting practice with a laptop and a Starbucks table will recognize this moment.
Christina Ho is betting her post-PCAOB career on it.
