Auditors need to improve challenge of management
Released 04 November 2019
Audit quality is still not consistently reaching the necessary high standards expected, according to the Financial Reporting Council’s (FRC) Developments in Audit report, particularly when challenging management and performing routine procedures such as revenue recognition.
The FRC is working with audit firms to ensure quality improves and will hold firms to account where remedial action is not taken to an appropriate level or on a sufficiently timely basis.
AQR inspection reports show that auditors continue to struggle most with challenging management sufficiently, especially in more judgemental areas, such as long-term contracts, goodwill impairment or the valuation of financial instruments. The inherent uncertainty and high potential financial impact of these issues mean the importance of robust, specific and independent challenge is vital.
Further information can be found on the FRC website at https://www.frc.org.uk/news/november-2019/auditors-need-to-improve-their-challenge-of-manage.