UK: FRC audit inspection results published

The Financial Reporting Council has today published the results of its most recent audit inspections, relating (on the whole) to the audits of companies with a December 2017 year end: see here. The inspections covered seven audit firms and the FRC reports that it found cases in all of them where auditors had failed to challenge management sufficiently on matters of judgement. Overall, the FRC classed 75% of the FTSE350 audits it inspected as being good or requiring limited improvements. The remaining 25% were assessed as being below an acceptable standard.

The FRC notes that there have been changes in individual audit firm performance. At Grant Thornton, for example, only half of the reviewed audits were classed as good or requiring limited improvement (down from 75% in the previous year). The FRC states that Grant Thornton is now under increased scrutiny. The firm announced, last year, that it had stopped tendering for FTSE350 external audit engagements, citing the cost involved: see here. It announced, last month, some of the actions it had taken (and will take) to address the concerns raised by the FRC: see here.

UK: audit quality - the Audit Inspection Unit's report on firms auditing ten or fewer entities

The Professional Oversight Board - part of the Financial Reporting Council - has published the Audit Inspection Unit's report on its inspections for 2010/11 at firms auditing ten or fewer entities: see here (pdf). The AIU reviewed selected aspects of nine audits and found that they all required improvement. In respect of four of these audits, the AIU found that significant improvement was required. The AIU identified the quality of audits in respect of multi-national groups as a major concern. Indeed, possible disciplinary action may follow as a result of the AIU's investigations in respect of two of the audits requiring significant improvement. Other areas for improvement identified by the AIU included the going concern assessment and the standard of reporting to audit committees.

UK: the AIU's 2010/11 annual report - concerns over audit quality continue

The Professional Oversight Board, part of the Financial Reporting Council, published today the Audit Inspection Unit’s latest annual report: see here (pdf). The AIU reviewed selected aspects of 92 audits in 2010/11 and, compared with last year, reports a reduction in the number of FTSE350 audits requiring significant improvement. However, the overall proportion of audits requiring significant improvement continues to concern the AIU, which outlines various improvements and recommendations in its report.

UK: Audit Inspection Unit publishes reports for the Big Four

Earlier this year the Audit Inspection Unit Annual Report for 2009/10 was published (see here, pdf). This provided an overview of the recommendations made by the AIU in respect of the quality of auditing by firms. Today the AIU's reports in respect of four firms (Deloitte LLP, Ernst & Young LLP, KPMG LLP and KPMG Audit PLC and PricewaterhouseCoopers LLP), on which some of its recommendations were based, have been published: see here. All of these reports identify areas for improvement by the firms.

UK: number of audits requiring significant improvement too high says AIU

The Professional Oversight Board, part of the Financial Reporting Council, yesterday published the Audit Inspection Unit’s Annual Report for 2009/10: see here (pdf).

The AIU reviews [a] the quality of the statutory audits of listed and other major public interest entities that fall within its scope and [b] firms’ policies and procedures supporting audit quality. The 2009/10 report provides an overview of the activities and findings of the AIU for the year ended 31 March 2010. With regard to the quality of audits by major firms the report finds:

... major firms have policies and procedures in place to support audit quality that are generally appropriate to the size of the firms and the nature of their client base. Nevertheless, improvements to these policies and procedures have been recommended at all firms. Notwithstanding the quality of firms’ policies and procedures, the number of audits assessed as requiring significant improvement at major firms (eight audits or 11% of audits reviewed at major firms excluding follow‐up reviews) is too high. Firms are therefore not always consistently applying their policies and procedures on all aspects of individual audits.

... a higher proportion of audits conducted by smaller firms require significant improvement. Six of the 11 smaller firm audits reviewed in 2009/10 (excluding follow–up reviews) were assessed as requiring significant improvement (2008/9: five of the 11 audits reviewed). Firms should not undertake audits unless they have the appropriate level of resources and expertise to ensure they are performed to an acceptable standard.

The AIU believes consideration should be given to establishing competency requirements specifically for auditors of listed and major public interest entities".

UK: AIU publishes overview of audit quality inspections

The Audit Inspection Unit - part of the Financial Reporting Council - has published an overview of its 2008/09 audit quality inspections: see here (pdf). The AIU notes (on p. 2): 

The AIU considers the overall quality of major public company audit work to be fundamentally sound. For each major firm the AIU has recommended to the relevant Audit Registration Committee that the firm’s registration to conduct audit work be continued. The AIU was generally satisfied with the basis on which significant audit judgments were made on the individual audits reviewed at the firms. It considered that audit procedures had generally been performed to a good or acceptable standard. However, the AIU identified certain areas at each major firm where improvements were in its view needed in order to enhance audit quality".

UK: Audit Inspection Unit reports published

The Professional Oversight Board, part of the Financial Reporting Council, has published inspection reports by the Audit Inspection Unit for 2008/9 in respect of Grant Thornton UK LLP (here); Horwath Clark Whitehill LLP (here); KPMG LLP and KPMG Audit PLC (here); and PricewaterhouseCoopers LLP (here). In general, the reports indicate that audit procedures were being performed to a good or acceptable standard in the audits surveyed. Nevertheless, in several of the audits reviewed the AIU identified the need for improvements in the obtaining and/or recording of audit evidence.