The Financial Reporting Council (FRC) has published its annual inspection and supervision results of the largest audit firms (BDO, Deloitte, EY, Grant Thornton, KPMG, Mazars and PwC).
Overall, 77% of audits inspected were deemed good or required limited improvement. This percentage reflects a year-on-year improvement spanning four years, with a 10% increase compared to the 67% recorded in 2020.
Five of the largest firms had no audits requiring significant improvements and the overall number of such audits has reduced from 7% in 2021/22 to 3% of audits inspected this year.
According to the FRC, it is encouraging to see Mazars and BDO both showing signs of improvement following initiatives and actions put in place to raise their audit quality. BDO’s audit inspections revealed that 69% of audits were considered good or requiring only limited improvement, a notable increase from the previous year’s 58%.
Similarly, Mazars saw an improvement, with 56% of their audits meeting the desired standards, up from 50% previously. However, the FRC stated to be ‘disappointed’ with the overall results and lack of progress in some areas. There remains work to be done as they continue to fall below the standard of their peers.
The report also highlights how management and audit committees play an integral role in the audit ecosystem and sets out examples of steps that audit committees can take to drive responsive and high-quality audits.
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By GlobalDataCommenting on this, FRC deputy chief executive, Sarah Rapson, said: “It is encouraging to see the ongoing and consistent improvement in audit quality at the largest audit firms.
“It is also encouraging to see progress at both Mazars and BDO. It is, however, disappointing that there are still significant areas of their work that need to be addressed and the FRC will continue its increased level of supervision, requiring them to take further action to raise the quality of their audits in certain areas.
“Improving audit quality is at the heart of our purpose to promote integrity and choice in the audit market, which plays a vital role in ensuring confidence in the UK economy.
“By embracing our role as an improvement regulator which acts in a fair and proportionate way, we are committed to creating a more resilient audit market with the capability and capacity to continue to work effectively in the public interest.”
