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The value of fines levied by the Financial Reporting Council against auditors has hit a record £33.2m in 2022/23, an increase from £32.8m in 2021/22 and £19m in 2020/21, Thomson Reuters has revealed.
Including the FRC’s costs that the auditors have had to pay, the total penalties levied by the FRC against auditors hit £40.4m last year.
Over recent years, the FRC has stepped up its use of fines as part of its efforts to improve the quality of audits. This includes plans to drive higher standards by progressing towards becoming the Audit, Reporting and Governance Authority (ARGA), with the anticipated transition date for the regulator pushed back to 2024.
Kyle Gibbons, head of global accounts for confirmation at Thomson Reuters, said: “Rather than risk fines, it now makes far more economic sense for audit firms to increase their rigour and technology stack. The sheer cost of fines issued in 2023 by the FRC demonstrates that the regulator is using serious sanctions to help improve the quality of audits across the industry in Britain.
“The FRC took the decision that with ARGA being delayed it should not wait for the transition before it started a new tougher fines regime, and the FRC reported an improvement in audit standards.”
Earlier this year the FRC stated that 77% of audits inspected were deemed good or required limited improvement compared to the 67% that reached that standard in 2020.
As part of the regulator’s focus for the 2023/24 year, the FRC will be promoting the use of technology, with particular emphasis on digital reporting. The regulator will also focus on internal upskilling and training ahead of proposed regulatory reform next year.
