FRC finds continued improvement at largest audit firms

The FRC has reported “continued improvement” across the largest audit firms, including BDO, Deloitte, EY, Grant Thornton, KPMG, Mazars and PwC. 

Its annual inspection of the firms’ audits found that 77% were deemed good or required limited improvement, reflecting a year-on-year improvement spanning four years, with a 10% increase compared to the 67% recorded in 2020.

Five of the largest firms had no audits requiring significant improvements and the overall number of such audits fell from 7% in 2021/22 to 3% of audits inspected this year. 

The FRC said it was also “encouraging” to see Mazars and BDO both showing signs of improvement following initiatives and actions put in place to raise their audit quality. 

BDO’s audit inspections found that 69% of audits were considered good or requiring only limited improvement, a “notable increase” from last year’s 58%. At Mazars, 56% of audits met the desired standards, up from 50% previously. Nonetheless, the FRC said it was disappointed with the overall results and lack of progress in some areas, adding there “remains work to be done” as the firms continue to “fall below the standard of their peers”.  

In addition, the report highlighted how management and audit committees “play an integral role in the audit ecosystem and sets out examples of steps that audit committees can take to drive responsive and high-quality audits”.

The FRC’s deputy CEO, Sarah Rapson, said: “It is encouraging to see the ongoing and consistent improvement in audit quality at the largest audit firms.

“It is also encouraging to see progress at both Mazars and BDO. It is, however, disappointing that there are still significant areas of their work that need to be addressed and the FRC will continue its increased level of supervision, requiring them to take further action to raise the quality of their audits in certain areas.”

She added: “Improving audit quality is at the heart of our purpose to promote integrity and choice in the audit market, which plays a vital role in ensuring confidence in the UK economy. By embracing our role as an improvement regulator which acts in a fair and proportionate way, we are committed to creating a more resilient audit market with the capability and capacity to continue to work effectively in the public interest.”