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