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The value of fines issued by the FRC against auditors has risen by 29% in the past year, from £21m to £27m ended 31 August, according to new research by Thomson Reuters.
The increase in the number of fines has been driven by an uptick in fines levied against the Big Four accountancy firms from 14 in 2021/22 to 19 in 2022/23.
This comes as, over recent years, the FRC has stepped up its use of fines as part of its efforts to improve the quality of audits. The regulator also more than doubled the size of its enforcement team from just 31 in 2020 to 64 in 2022.
According to Thomson Reuters, accountancy firms are increasingly investing in technology to enhance audit standards.
John Hiller, VP of product management at Thomson Reuters, said: “The increase in fines demonstrates that the FRC is holding the British audit industry to the highest possible standards. Audit firms are facing increased pressure with larger regulatory enforcement teams and the threat of large fines.
“Firms are responding to this by investing in a new generation of technology that’s specifically designed to improve audit quality and root out poor practice. Ensuring high audit compliance levels is now vital to preserve the reputation and protect the bottom line of audit companies. In the future of audit, technology will certainly be a key enabler to help auditors accelerate the value they can offer their clients and operate more efficiently.”
The FRC has a series of both financial and non-financial sanctions at its disposal as part of its compliance work. The regulator can issue reprimands, exclude auditors from membership of professional bodies and carry out additional remedial actions as deemed appropriate. Both financial and non-financial penalties can be issued in combination.
The FRC is scheduled to transition to the Audit Reporting and Governance Authority (ARGA) next year. ARGA will have broader oversight powers and the ability to issue even heavier penalties, with its scope including Public Interest Entities company directors.
