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Audit quality is in decline

28 June 2018

The Big 4 accountancy firms must act quickly to reverse the decline in thus year’s audit inspection results if they are to achieve the targets for audit quality set by the FRC.

Overall results from the most recent FRC inspections of eight firms show that results are declining.

Across the Big 4 the fall in quality is due to a number of factors, including the failure to challenge management and show appropriate scepticism across their audits, and poorer results from audit of banks.

The FRC claims that there has been an “unacceptable deterioration in the quality of one firm, KPMG”. Some 50% of KPMG’s FTSE350 audits required more than just limited improvements, compared to 35% in the previous year. As a result KPMG has been put under special measures and will be subject to increased scrutiny. That means the FRC will be inspecting 25% more KPMG audits over its 201/19 cycle of work. It will also be closely monitoring the implementation of the firm’s audit quality review. For its sins KPMG has agreed that its efforts in recent years have ‘not been sufficient’. FRC promised it will hold KPMG’s new leadership to account for their work to improve audit quality.

Read the whole story and a list of the FRC's latest sanctions in the next issue of PQ magazine...

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