One in three audits not good enough

A third of the audits completed by the UK’S biggest accountancy firms recently fell short of the quality expected, the sector watchdog has found.

In a study of 88 audits completed by the seven biggest firms, the Financial Reporting Council (FRC) found that only two-thirds were of a good standard or required limited improvements.

The findings will stoke controversy about the audit business. A series of accountancy firms have faced questions regarding their work in connection with big companies that collapsed.

The FRC said the number of audits requiring more than limited improvements, 29 (33%), remains unacceptable.

Executive director David Rule noted: “While firms have made some improvements and we have observed instances of good practice, it is clear that further progress is required.

“The tone from the top at the firms needs to support a culture of challenge and to back auditors making tough decisions.”

The study covered the work of big four giants Deloitte, PWC, EY and KPMG.

Audits by leading second tier firms BDO, Grant Thornton and Mazars were also examined.

Mazars performed best of the seven firms whose work was studied, while Grant Thornton did worst.

The FRC found four of the five (80%) Mazars audits it reviewed required no more than limited improvements.

Five of the nine, 55%, Grant Thornton audits reviewed were assessed as requiring no more than limited improvements.

In the FRC’S report on its work Grant Thornton said it developed an Audit Investment Plan in spring 2019 after recognising it was not consistently achieving the high level of audit quality it expected.

The firm said it had recognised the changes it was making would not be evident in the 2020 report, due to the time lag between audits being performed and them being reviewed.