UK: improvements in auditing required says AIU

The Professional Oversight Board (part of the Financial Reporting Council) has published the Audit Inspection Unit’s (AIU) 2007/08 inspection reports for the following audit firms: BDO Stoy Hayward LLP, Deloitte & Touche LLP, Ernst & Young LLP, Grant Thornton UK LLP, KPMG LLP and KPMG Audit PLC, PKF (UK) LLP and PricewaterhouseCoopers LLP. This is the first time that these reports have been published: they are available here. An overview of the AIU's quality inspections has been published (see here), in which the AIU observes:

The AIU considers the quality of auditing in the UK to be fundamentally sound. The AIU public reports indicate that the senior management of the seven major firms are committed to audit quality and have quality control procedures in place which are appropriate to their size and the nature of their client base. The reports confirm that in each case the AIU has recommended to the relevant Audit Registration Committee that the firm’s registration to conduct audit work be continued. The AIU believes that its inspection process is both rigorous and challenging for firms and that the progress achieved by the firms in addressing the findings from its inspections in previous years has contributed significantly to an improvement in the overall quality of audit work in the UK.

In relation to its reviews of individual audits undertaken by the seven major firms, the AIU considered the audit work generally to have been performed to a good or acceptable standard. However, the AIU’s review of individual audits at each firm identified certain areas in relation to which further improvements need to be made by the firms.

A small proportion of the audits reviewed at the seven major firms were considered by the AIU to require significant improvement in certain areas. Only three of these audits related to entities which were listed on a regulated market1 and none related to FTSE100 entities. The proportion of audits requiring significant improvement was, however, higher at the “smaller firms”.

For media comment, and some comments from the firms, see this report in the Financial Times.