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FRC publishes Developments in Audit 2021 report

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22 Nov 2021

The Financial Reporting Council (FRC) has published its latest Developments in Audit report.

The report provides an assessment of the UK audit market as a whole and also sets out the FRC's expectations of how audit firms should deliver audit quality improvements so that the market works more effectively and in the public interest.

The report indicates that whilst there have been some successful improvement measures made at audit firms, 'audit quality remains mixed and inconsistent across the firms and in some instances, between audits at the same firms'. 

The FRC still finds deficiencies relating to lack of professional scepticism by auditors and also in the challenge of management assumptions.  However it has also seen some examples of good practice in the use of internal and external specialists to challenge management's assumptions, the delaying of audit opinion sign-offs to ensure sufficient time was available and robust challenge of the component auditor's work by group auditors.  

Due to an 'unacceptable' level of audits requiring improvements with respect to smaller firms which audit public interest entities, the FRC has increased its supervisory resources in that area to drive through improvements.  The FRC has recently published a guide on what make a good audit which sets out its views on what constitutes a good or high-quality audit, focusing on two key areas: how the audit itself is run and what makes for a high-performing audit practice.  It indicates that this will be 'particularly useful for the smaller firms as they continue to build their capability and capacity'.

The Developments in Audit Report also includes an overview of the FRC's supervisory work, audit market trends and new UK auditing standards.

A press release and the Developments in Audit Report are available on the FRC website.

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