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BDO and Forvis Mazars have been warned by the FRC that they may be prevented from signing off the accounts of their biggest clients should their audit work not improve following its annual audit survey.
The FRC has reprimanded the two firms after it found that their work was “significantly below [its] expectations”.
Of the 13 BDO audits that the FRC inspected barely a third were considered up to scratch, down from 69% last year.
Furthermore, only 44% of the nine Forvis Mazars audits it scrutinised were deemed acceptable, down from 56%.
Despite this, the overall quality of audits had improved as 74% were categorised as good or requiring limited improvements.
The Big Four firms all improved with 94% of Deloitte 76% of EY audits, 89% of KPMG audits and 76% of PwC audits up to standard.
Audit quality for the FTSE 350 has also improved, up from 81% to 87% year on year.
The FRC has warned of a widened gap in audit quality between the Big Four and the other so-called Tier one firms.
Paul Eagland, managing partner at BDO, said: “We are deeply disappointed with our grades this year, particularly when we had recorded an improvement last year. While we remain confident in the expertise and commitment of our people, it is evident that further work is necessary for us to be able to secure grades in line with the FRC’s requirements as well as our own internal standards.”
Phil Verity, Forvis Mazars UK CEO, added: “We are disappointed with this year’s results and recognise that we have not consistently met the desired levels of audit quality. We are encouraged by the FRC’s acknowledgement that transforming audit quality takes time. Forvis Mazars continues to take positive actions in relation to improving audit quality and strengthening the firm-wide systems and audit quality functions.
“The files inspected by the FRC in this cycle did not benefit from the impact of our Audit Quality Transformation Plan which was launched in October 2023 and we anticipate that audits delivered since then will show improvements in audit quality in the July 2025 FRC Public Report. Forvis 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, so that we can play our full part in the UK PIE Audit market.”
Sarah Rapson, FRC’s executive director of Supervision, said: “The FRC welcomes the audit quality improvement at the largest four audit firms, particularly the improvement in FTSE 350 audits, which are some of the most complex and systemically important UK audits. This progress demonstrates the considerable efforts to improve audit quality firms have made over a number of years.
“Disappointingly, BDO and Forvis Mazars’ performance has fallen significantly below our expectations. Both firms are strategically important to the UK audit market and the wider UK economy, so it is vital that they deliver on their agreed improvement plans. The FRC’s supervisory work with these two firms will continue to focus on these improvements.”
Forvis Mazars has also been contacted for comment.
