Grant Thornton has reportedly been demoted from top tier of audit supervision after the accountancy firm cut its number of high profile clients, the Financial Times has reported.
According to regulatory filings, the Financial Reporting Council industry watchdog moved the firm from “tier one” to “tier two” supervision status last year.
The firm’s demotion to “tier two” leaves the Big Four companies, namely Deloitte, EY, KPMG and PwC, plus BDO and Mazars as the remaining “tier one” firms.
Grant Thornton cut the number of PIEs it audits by more than 70% between 2016 and 2022, auditing 20 of them in 2022.
As a result, the watchdog will only conduct inspections of the firm’s “public interest entity” audits every three years, rather than every 12 months.
In recent years, Grant Thornton has also faced several regulatory fines due to deficiencies in its audit work.
It has received a total of £4m in fines since 2021 after the FRC uncovered shortcomings in its audits of collapsed café chain Patisserie Valerie, retailer Sports Direct and outsourcer Interserve.
In 2022, the administrators of Patisserie Valerie also settled a £200m lawsuit with Grant Thornton that alleged negligence in its audits of the café chain.
However, according to the report Sarah Rapson, executive director for supervision at the FRC, said its move from tier one to two “is not a reflection of [Grant Thornton’s] audit quality but reflects their smaller share of the PIE market”.
Grant Thornton told the Financial Times: “We are extremely proud of our quality results over the last three years and respect the regulator’s decision to include our firm in its ‘Tier 2’ category of supervision.
“The decision by the FRC has no impact on our audit strategy and our continual investment in audit quality.”
Writes Cynera Rodrick in Accountancy Today