Results of FRC's 2018/19 Audit Inspections
The Financial Reporting Council (FRC) has published the results of its latest audit inspections. It notes that 75% of the audits of FTSE 350 entities which it reviewed were found to be good or requiring only limited improvements. This represents no overall change on the previous year's outcome, and remains significantly short of the FRC's target of 90%.
Although the overall results have barely moved, there have been some notable changes in findings at individual firms:
At Grant Thornton (GT), 50% of audits reviewed were found to be good or requiring only limited improvements, compared to 75% in the previous year. Over the past five years, 26% of GT's audits which have been reviewed by the FRC have required significant improvement. The FRC's scrutiny of GT is therefore to be extended, with an increased number of audits being reviewed in the 2019/20 cycle;
65% of PwC's FTSE 350 audits reviewed were found to be good or requiring only limited improvement - a decline from the figure of 84% last year. As a result, PwC has announced an action plan to improve audit quality, and the implementation of this plan will be closely followed by the FRC; and
KPMG's results have improved but, as the firm's previous review performance had led to it being placed under increased FRC scrutiny, this will remain in place until the FRC is satisfied that the improvement can be sustained.
The FRC has announced that, for its 2019/20 reviews, the target of 90% of audits reviewed being found to be good or requiring only limited improvement will be extended to all audits which they examine, not just those of FTSE 350 entities. For 2020/21, the target will be increased to 100% from 90%.
The FRC's press release on its latest findings can be accessed here, where links to the individual firms' results, the names of the audits reviewed and a summary of the FRC's approach to audit reviews will also be found.
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