Accounting Standards

Mazars and BDO audits deemed ‘unacceptable’ by FRC 

The findings come from the regulator’s annual inspection and supervision results of the largest audit firms, which found that overall, 75% of audits inspected were good or required limited improvement

The Financial Reporting Council (FRC) has dubbed the audits of challenger firms Mazars and BDO “unacceptable” in its annual inspection and supervision results of the largest audit firms.

The report, which analysed the audits of BDO, Deloitte, EY, Grant Thornton, KPMG, Mazars and PwC, found that overall, 75% of audits inspected were good or required limited improvement, compared to 71% in 2021 and 67% in 2020.

Five of the largest firms had no audits requiring significant improvements, and KPMG’s individual audit inspections were found to have “significantly improved”, which the FRC said was “promising, but is not yet a trend”. 

However, the regulator said the inspection results at Mazars and BDO “remain unacceptable”. Four of the eight audits reviewed at Mazars, and five of the 12 audits reviewed at BDO required more than limited improvements. 

It has now developed specific supervisory plans to closely monitor BDO and Mazars’ priority actions, and the FRC said it will continue to “ensure the challenger firms are prioritising high quality audit with a view to offering increased choice and resilience in the market, but growth ambitions must also be tempered by a focus on quality first and foremost”.

Overall, the report found the number of audits considered good or requiring limited improvement has improved on the previous two years. 

In a statement to Accountancy Today, Scott Knight, head of audit at BDO, said: “Ensuring we consistently deliver high-quality audits is our top priority. We’re disappointed this year’s grades do not meet the standards expected by the regulator and our Leadership Team, and will continue to work hard to fully address the FRC’s findings. 

“We have made significant investments in resourcing our audit practice over the last year, including the addition of 350 people to take our overall UK audit team headcount to 2,800. Further investments in audit quality initiatives include recent enhancements to our methodologies and technology. However, these actions take time to embed, and are therefore not reflected in this year’s reviews.”

 He added: “Our entire audit practice remains focussed on being able to demonstrate sustained quality improvements over the coming years to restore our leading position in the AQR rankings.”  

In a statement to Accountancy Today, a Mazars spokesperson said: “We are very disappointed by the findings in this year’s FRC Public Report. We are committed to addressing the issues which have been identified as part of our continuous quality improvement plan. Mazars is dedicated to quality; it is central to our values and strategy. We will continue to invest in, and focus on, applying the highest quality standards in our work.”

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