The Financial Reporting Council (FRC) has announced the launch of a comprehensive market study into the audit market for NHS providers and Integrated Care Boards (ICBs). This initiative is in response to growing concerns about difficulties NHS bodies are facing appointing and retaining auditors.

As the shadow system leader for local audit, the FRC is committed to leading work to improve the capacity and capability of the local audit market. This study marks a significant step towards understanding the complex challenges facing the sector and aims to inform the FRC’s wider policy and work relating to local audit.

The NHS audit market has faced significant challenges in recent years, with delays in the production of audited accounts limiting the ability of various bodies to sign off on financial statements. In 2023, there were only 106 Key Audit Partners able to sign off audit opinions of 647 local audit entities, across nine firms undertaking local audits.

Key areas the FRC’s market study will explore include:

  • Supply of auditors, including barriers to entry and expansion for audit firms
  • Demand for audit, including the audit tendering process and engagement by NHS bodies
  • The regulatory framework, including unique features of NHS provider and ICB audits
  • Capacity constraints and potential impacts on the wider local audit market

Commenting on this, FRC executive director of supervision, Sarah Rapson, said: “High-quality financial statements that have been subject to external audit are crucial for effective decision-making and accountability across the NHS and for building trust in the financial health of the sector. The findings of this market study will provide valuable insights into the challenges facing the NHS audit market and inform our approach to working with system partners to improve the local audit system as a whole.”

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