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FRC publishes second report on developments in audit

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03 Aug 2017

The Financial Reporting Council (FRC) has published its second report on developments in audit. The assessment of the quality of UK audits is driven by the FRC’s audit monitoring activity.

The report indicates that “the overall standard of audit work being done for the FTSE 350 companies in the UK is improving” and that there is “evidence of continuing improvement, particularly for larger audits”.  However the message is not so positive outside of the FTSE 350 where a higher proportion of the audits reviewed by the FRC required “more than limited improvements”.

The report identifies that the improvements, particularly for the larger audits, are a factor of increased focus by audit firms’ leadership on audit quality and promoting a culture of continuous improvement.  However the report notes that “the picture is not consistent across all firms, market sectors and audit procedures.  High profile accounting failures, as well as the results of our audit monitoring, continue to identify cases where auditors have not met expectations”. 

In order to meet and exceed the target set by the FRC that at least 90% of FTSE 350 audits inspected in 2018/19 will require no more than limited improvement the FRC indicates that “a strong commitment to continuous improvement is vital”. 

Setting out what has been done to promote continuous improvement in audit quality, the report also highlights key areas of FRC future focus which it says it continues to have “concerns” and which “are risks to continuous improvement”.

The report is accompanied by a more detailed report which provides a more in depth report of recent developments in the market and where the FRC fits in as the market regulator.

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