FRC urges auditors to ‘redouble’ efforts during Covid

The Financial Reporting Council (FRC) is urging auditors to “redouble” their efforts in order to rectify inconsistent audit reporting.

The regulator’s ‘Developments in Audit 2020’ report identifies that audit quality remained too inconsistent in the most recent round of inspections, with 49 out of 130 audits needing either a slight or drastic improvement.

Inconsistent quality was found in audits completed before the impact of Covid-19 on the sector.

Among the risks to the audit market identified in the report were the concentration of the FTSE 350 audit market, the limited choice available for companies to obtain a high-quality audit, and the market’s vulnerability to the failure of one of the Big Four firms.

David Rule, the FRC’s Executive Director of Supervision, said: “Auditors have a key role to play in ensuring users of annual reports have reliable financial information. Despite there being examples of good auditing, auditors are still not delivering to a consistently high standard.

“Covid-19 has emphasised the importance of high-quality financial reporting, alongside challenging and rigorous auditing.”

He added: “During the pandemic auditing has become more challenging and audit firms need to redouble their efforts to deliver the required consistency in audit quality.”