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“There are indications that audit quality is being challenged by changing market conditions with an unprecedented movement of complex audits from larger to smaller firms which is requiring those smaller firms to move quickly to upscale their risk and quality processes. Greater visibility of this movement is important so that the Institute can check proactively that firms have the right expertise and experience to take on new larger audits.”

The results were based on nearly 500 audit monitoring visits carried out by ICAEW’s Quality Assurance Department in 2023/24

A total of 71% of audits in 2023/24 were deemed good or generally acceptable, ICAEW has revealed. 

The latest audit monitoring report showed a strong performance by the larger audit firms with 88% of non-Public Interest Entity (PIE) audits carried out by larger firms considered good or generally acceptable. 

Outside of the larger firms, most firms reviewed this year were different to those reviewed last year due to most firms being on a six-year review cycle, which makes year on year comparisons very difficult. 

The results were based on nearly 500 audit monitoring visits carried out by ICAEW’s Quality Assurance Department in 2023/24. Reviewers were asked to select the audits considered to be the most complex and challenging so the overall result is not necessarily representative of average audit quality, which is likely to be higher. 

Rama Krishnan, chair of ICAEW’s Audit Registration Committee, said: “While there has been no deterioration in the overall result this year, it is slightly disappointing that overall performance has not improved. However, we recognise that different firms are reviewed each year which makes it difficult to make year on year comparisons.

“There are indications that audit quality is being challenged by changing market conditions with an unprecedented movement of complex audits from larger to smaller firms which is requiring those smaller firms to move quickly to upscale their risk and quality processes. Greater visibility of this movement is important so that the Institute can check proactively that firms have the right expertise and experience to take on new larger audits.”

Krishnan concluded: “That is why the Committee fully supports the proposal by the ICAEW Regulatory Board to change the Audit Regulations to require firms to report the acceptance of new audits falling within certain criteria.”

Accountancy Today

It comes following reports earlier this summer that CVC Capital Partners, the private equity backer of Six Nations Rugby reportedly held discussion with the firm over acquiring UK and Irish affiliates

Swedish global investment firm EQT has reportedly joined the race to acquire a large stake in the UK arm of accountancy firm Grant Thornton, according to Sky News.

The outlet reported that EQT submitted a bid to Grant Thornton’s advisers ahead of the auction deadline last week. It is thought that any deal would be valued between £1bn-£2bn.

It comes following reports earlier this summer that CVC Capital Partners, the private equity backer of Six Nations Rugby, reportedly held discussions with the firm over acquiring UK and Irish affiliates.

Since then, a number of potential suitors have been cited, including Carlyle, Cinven, Permira and Nordic Capital.

CVC owns advisory firm Teneo which acquired Deloitte UK’s Restructuring Services division back in 2021.

A spokesperson for Grant Thornton UK LLP told Accountancy Today at the time: “As all businesses do, we continually evaluate the external business and economic landscape and explore various avenues that will drive growth for our firm.

“This enables us to make informed decisions about what’s best for our people, our clients and our firm. We are not actively engaged in any such transaction. We are committed to remaining as a multi-disciplinary firm. We will not be commenting further on this matter.”

Lewis Catchpole writes in Accountancy Age

The FRC’s report, which was published today, showed that the overall quality of audits has improved as 74% of firms were categorised as good or requiring limited improvement

The ICAEW has renewed calls to establish ARGA as a new regulator whilst welcoming the FRC’s latest annual Tier 1 audit firm inspection results, which showed that overall audit quality has risen.

The FRC’s report, which was published yesterday, showed that the overall quality of audits has improved as 74% of firms were categorised as good or requiring limited improvements.

The Big Four firms all improved with 94% of Deloitte 76% of EY audits, 89% of KPMG audits  and 76% of PwC audits up to standard.

Audit quality for the FTSE 350 has also improved, up from 81% to 87% year on year.

The FRC warned of a widened gap in audit quality between the Big Four and the other so-called Tier one firms, however. The ICAEW also highlighted this, underscoring the “challenges” faced by firms outside of the Big Four who are looking to take on PIE audits. 

Alan Vallance, ICAEW CEO, said: “While it is encouraging to see that overall audit quality has gone up, these results demonstrate the challenges firms outside the Big Four have faced while building a presence in the PIE audit market. 

“The FRC has set out plans to boost performance where it is lacking and the report acknowledges the important role smaller firms play in creating a resilient audit market, as well as the potential issues arising from de-risking audit portfolios.” 

He added: “The FRC’s role in improving audit quality and competition must also not be overlooked, including through its scalebox initiative, and we urge it to renew efforts to support firms seeking to take on PIE audits.  

“The regulator has also highlighted the Spring Report, which found that performing a good audit of challenging companies requires action by the company and the auditors.

In our view it is essential that the new regulator ARGA is established and given wider powers to take effective enforcement action as needed.” 

Writes Heather Sandlin in Accountancy Today

Advancetrack’s Accounting Talent Index survey found three-quarters of the firms reported partner hours had increased, with 42% of cases showing an increase of more than 20%, or an extra day per week

Almost 90% of worldwide professionals have stated that increased working hours caused by an “existential” skills shortage are “significantly” harming their mental health, work life balance and stress levels, according to Advancetrack’s Accounting Talent Index survey.

The report from the global accountancy outsourcing specialists revealed that the impact is hitting accountants at all levels – from staff to partners, with young employees in particular “voting with their feet”.

It said it estimates that around 300,000 accountants exited the profession between 2019 and 2022 in the US and this trend is mirrored across the UK and Australia.

The Accounting Talent Index also revealed that almost half of firms (45%) worldwide are being “severely” or “significantly” affected by the skills shortage.

The index, which surveyed firms across continents, estimated the figure to scale to hundreds of thousands of firms, with 74% reporting the problem to be “significantly worse than three years ago”.

It also showed the perception of accounting as a “demanding profession with unappealing long hours and high stress is a significant deterrent, compounded by an evolving job market where other professions may offer more attractive benefits, work-life balance, and perceived career fulfilment”.

Additionally, for 25- to 29-year-olds, the median salary for accountants dropped by around 6% between 2016 and 2022. Conversely, professions such as data analysts (13%), management analysts (7%) and marketing analysts (6%) all saw significant increases.

Three-quarters of the firms reported partner hours had increased, with 42% of cases showing an increase of more than 20%, or an extra day per week.

Advancetrack’s call for action comes after ICAEW charity Caba recently published a similar analysis of mental health in the accounting profession across the UK. That report said more than half (56%) of accountants are suffering from stress and burnout, with workload, long hours and complexity cited as the main reasons.

Vipul Sheth, MD of Advancetrack, said: “The Accounting Talent Index shows we face a perfect storm: It seems it’s never been harder to be a partner of an accountancy firm – and it’s never been less appealing to join the profession.

“The root cause seems to be the ever-widening chasm between demand and supply of talent in major economies like the U.K., U.S. and Australia. What we need now is a concerted effort to stop the rot, with the sector’s biggest firms leading by example. We’ve developed five action points we’ll be urging organisations across the sector to embrace, regardless of their size or geography.”

Cynera Rodricks writes in Accountancy Today