The Financial Reporting Council (FRC) has just published its latest edition of Developments in Audit, which sets out the FRC’s annual assessment of UK audit and ongoing expectations for how audit firms deliver the most effective service for the UK market, writes David Little, a Partner in our Corporate and Commercial department.
In this year’s Developments in Audit, ‘professional scepticism’ and ‘challenge of management’ remain the two key areas where deficiencies continue and improvement still needs to be made.
The FRC highlights examples of good practice in the use of internal and external specialists to challenge management’s assumptions, the delaying of audit opinion sign-offs to ensure sufficient time was available and robust challenge of the component auditor’s work by group auditors.
The FRC has over the past year increased the number of inspections of smaller firms which audit public interest entities, finding 10 of 16 audits reviewed required improvements.
They are understandably unhappy about this so the FRC has increased resources dedicated to supervision of the smaller firms to drive those improvements.
This week its What Makes a Good Audit? publication sets out the good practice firms should be following to deliver high quality audit. This guidance should be particularly useful for smaller firms as they continue to build their capability and capacity.
The FRC’s Executive Director of Supervision, Sarah Rapson, says, “While it is encouraging that today’s report finds some of the audit firms are successfully implementing improvement measures, audit quality remains mixed across the firms.
“As we continue to lay the groundwork for establishing a new regulator – the Audit, Reporting and Governance Authority – our continued objective will be to drive all firms to deliver consistent, high-quality audit to the benefit of all stakeholders and the wider public.”
A link to Developments in Audit is available here.
The above is accurate as at 19 November 2021. The information above may be subject to change during these ever-changing times.
The content of this note should not be considered legal advice and each matter should be considered on a case-by-case basis.