FRC welcomes improvement among smaller auditors
Audit inspection unit pleased with response to guidance issued last year
Inspectors working for the Financial Reporting Council (FRC) declared themselves pleased with the progress made by small-scale auditing firms this year.
The audit inspection unit (AIU) of the Professional Oversight Board stressed that areas of concern remain in terms of the work being done by auditing firms with 10 or fewer listed or large-scale clients but said improvements are being made.
“The number of audits reviewed requiring significant improvement is slightly lower than the prior year but continues to be of concern,” the inspection unit said in its report.
“However, a significant improvement in audit quality was noted in respect of those audits where a follow?up review was performed and we are pleased that individual firms respond positively to matters we have raised.”
Firms within the scope of the AIU review should take further steps to ensure sufficient scepticism is being deployed by their auditors, the oversight board unit said. Making sure audit committees are being reported to as fully as they ought to be was also raised as an issue in need of attention.
Four of the nine audits reviewed by inspectors were deemed to be in need of significant improvements this year, compared to six 12 months ago. The report points out that a less than favourable assessment does not necessarily mean an inappropriate audit opinion was issued.
The review of smaller audit firms involved those who look at the books of various listed and large companies but the biggest players in the sector were assessed by a report published in July.
Each of the Big Four firms, namely KPMG, PwC, Ernst & Young and Deloitte, were urged to make improvements to the auditing work they carry out, which includes 99 of the 100 biggest businesses in the UK.
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