FRC reports continued improvement in audit quality but further action needed

Posted on July 14, 2023 by Editor

The UK’s Financial Reporting Council (FRC) has released its annual inspection and supervision results for the largest audit firms, including BDO, Deloitte, EY, Grant Thornton, KPMG, Mazars, and PwC. The report reveals that 77% of audits inspected were deemed good or required only limited improvement, representing a consistent year-on-year improvement over the past four years.This positive trend reflects the ongoing efforts to enhance audit quality.

Notably, five of the largest firms had no audits requiring significant improvements, and the overall number of such audits has reduced from 7% to 3% compared to the previous year. This demonstrates the effectiveness of the measures taken by the firms to address areas requiring improvement and strengthen their audit processes.

However, the FRC also highlights the need for further improvement, particularly in the case of BDO and Mazars. While both firms have shown positive signs of improvement, they still fall below the standard of their peers. BDO’s audit inspections revealed that 69% of audits were considered good or requiring only limited improvement, a notable increase from the previous year’s 58%. Similarly, Mazars saw an improvement, with 56% of their audits meeting the desired standards, up from 50% previously. The FRC acknowledges these positive developments but urges both firms to continue their efforts to close the gap with their counterparts.

The report emphasises the importance of management and audit committees in driving high-quality audits. It highlights the integral role these stakeholders play in the audit ecosystem and provides examples of steps that audit committees can take to promote responsive and high-quality audits. The FRC encourages firms to collaborate closely with management and audit committees to enhance their audit processes and ensure the delivery of reliable and accurate financial information.

Read more here.

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