The FRC has found that Deloitte required only few improvements in the way it carried out its audits as part of its annual inspection of the largest audit firms.
The regulator reviewed 17 individual Deloitte audits this year and assessed that 14 (82%) required no more than limited improvements. Of the 11 FTSE 350 audits it reviewed this year, it assessed 10 (91%) as achieving this standard.
Its key findings related to the audit of estimates for certain provisions, group audits, the review and challenge by the EQCR partner and the application of the FRC Ethical Standards, particularly the approval of non-audit services.
During its inspection, it identified a range of good practice related to risk assessment, the execution of the audit and completion and reporting.
It said the firm continued to communicate the importance of audit quality and continuous improvement and shared emerging issues and good practices on a real time basis.
It also noted there had been increased communications involving audit teams sharing their experiences with the wider audit practice, often through webcasts. The FRC said this “reinforces audit quality messages and can make them more relatable”.
Meanwhile, further enhancements have been made to the firm’s Audit Quality Plan, which now includes details of key initiatives that have been recently implemented. The FRC did however say the plan must be further improved by providing clearer focus on the current priority areas, as well as continuing to strengthen the reassessment of the effectiveness of the AQP.
According to the FRC, Deloitte recognised that there is a need for a central team with “clearly defined and dedicated responsibility for identifying and implementing an appropriate response to consistent and recurring findings”. It added that a Continuous Improvement Group will have responsibility for this, and that it is important that there is increased focus on embedding the CIG team, who must have a clear and consistent focus on the priority areas.
In its response within the report, Deloitte said: “We are proud of our people’s commitment to delivering high quality audits and we continue to have an uncompromising focus on audit quality. We are pleased that both the overall and FTSE 350 inspection results for our audits selected by the FRC as part of the 2021/22 inspection cycle show an improvement.
“This reflects our ongoing focus on audit quality, and we will maintain our emphasis on continuous improvement as we seek to further enhance quality. We also welcome the balanced content of the report with the new forward-looking supervision approach taken by the FRC as well as the FRC’s proposed response to this year’s findings and seek to engage and respond proactively. Audit quality is and will remain our number one priority and is the foundation of our recruitment, learning and development, promotion and reward structures.”