FRC Audit Inspections report ‘unacceptable’ lack of improvement in quality
Released 09 July 2019
The Financial Reporting Council (FRC) issues its warning following the 2019 Audit Quality Inspections report.
The report noted only 75% of audits were assessed as good or requiring limited improvements, against the FRC’s target of 90%. This meant there was only marginal improvement from the 2018 review, which reported a 73% acceptability rate.
None of the firms reviewed made the FRC’s audit quality target of 90% for FTSE 350 audits. Across the largest seven firms, the outcome was again 75%, as compared to 74% in the previous review. Grant Thornton came in for particular note, and has been ‘placed under increased scrutiny due to sustained poor results’. The firm was assessed as meeting the good or requiring limited improvements level in only 50% of cases.
The main issue that was raised in the review was that auditors had failed to challenge management sufficiently on judgments.
The review relates principally to audits of companies’ December 2017 year-ends.