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FRC publishes audit quality inspection reports of the major audit firms

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15 Jul 2020

The Financial Reporting Council (FRC) has published individual audit quality inspection reports for the major audit firms.

The results highlight that 67% of the 88 audits reviewed required “no more than limited improvements” with 33% of audits requiring “more than limited improvements” which the FRC has indicated “remains acceptable”.

Whilst the FRC acknowledges that there have been some improvements including in the areas of group audit oversight and effective integration of specialists into the audit team, it highlights that “firms are still not consistently achieving the necessary level of audit quality”. The FRC flags that improvements can be made in the areas of impairment of goodwill and intangibles, revenue and contracts and provisions including loan loss provisions. Finding across firms were also identified in the auditing of inventory, group oversight, going concern and investment property valuations.

The reports set out the principal findings arising from the audit quality inspection work carried out by the FRC’s Audit Quality Review (AQR) team for 2019/20. The priority sectors for inspection were Financial Services, General Retailers, Business Support Services, Construction and Materials and Retail Property. The reviews focused on going concern and the viability statement, the other information in the annual report, long-term contracts, the impairment of assets and fraud risk assessment.

The press release and links to individual reports are available on the FRC website.

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