The UK Financial Reporting Council (FRC) have issued over £12.5 million of sanctions on auditors and audit firms in 2016/17, whilst reporting an improvement in the standards of audit quality for FTSE 350 companies in UK.
In its second annual report, Developments in Audit, the FRC reports that the quality of the FTSE 350 audits inspected improved in 2016/17 with 81% classified as either good or with limited improvements required compared to 77% in the previous year and 68% four years ago.
Audits of FTSE 100 have also improved in the last year with 92% of them categorised as either good or require limited improvements compared to 65% in the previous year.
However, a large proportion of non-FTSE 350 audits required more than limited improvements.
The report is based on the FRC’s audit monitoring activities on the quality of individual audits of public interest entities (PIEs) and from the thematic reviews focusing on certain aspects of PIE audit firms as well as their audit practices. The report also draws on the information from the professional bodies on their inspection of non-PIE audits.
FRC executive director for audit and actuarial regulation Melanie McLaren said: “In our monitoring of audit quality we have yet to see overwhelming evidence of improvement in all sections of the market or the consistency of performance we want between different firms. Firms are though investing in improvement measures, and those Audit Committees surveyed report that they are seeing evidence of good quality audit.”