The Financial Reporting Council (FRC) has announced it is to increase resources dedicated to the supervision of smaller firms after its most recent report found that 10 of 16 audits reviewed “required improvements”.
The latest edition of Developments in Audit sets out the FRC’s annual assessment of UK audit and ongoing expectations for how audit firms should deliver audit quality improvements to deliver a more effective audit market in the public interest.
It revealed “professional scepticism” and “challenge of management” remain the two key areas where deficiencies continue and improvement still needs to be made.
However, the FRC said it is “pleasing” to see 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.
The report also includes an overview of the FRC’s supervisory work, audit market trends and new UK auditing standards, including the auditor’s responsibilities relating to fraud, which are designed to further improve assurance for users of accounts.
The FRC’s executive director of Supervision, Sarah Rapson, said: “While it is encouraging that today’s report finds some of the audit firms are successfully implementing improvement measures, audit quality remains mixed across the firms.
“As we continue to lay the groundwork for establishing a new regulator – the Audit, Reporting and Governance Authority – our continued objective will be to drive all firms to deliver consistent, high-quality audits to the benefit of all stakeholders and the wider public.”