The UK Financial Reporting Council (FRC) is concerned about the quality of audits by the big accountancy firms, despite an improvement over the past few years. In the annual check by the industry watchdog, it still found many deficiencies at individual firms.
According to the FRC 67 per cent of audits inspected for the year ended 31 March were assessed as either good or only requiring limited improvements, compared with 60 per cent the previous year.
However, the council said it remained “concerned” that a third of all inspected audits either required improvements or significant improvements, compared with 40 per cent in 2013-14.
Common issues identified by the council include lack of scepticism, insufficient or inappropriate procedures and failure to identify potential threats and safeguards to auditor independence.
The FRC has tried to sharpen its scrutiny to improve the standard of audits after the financial crisis. It has introduced a sanctions procedure, launched an initiative to require audit firms to take remedial action to tackle deficiencies and introduced thematic reviews to try to accelerate improvements.