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FRC finds nearly a third of audits could be improved

T

he UK’s accounting watchdog has said nearly one third of audits it has inspected recently require improvement, with Big Four firm KPMG among those singled out.

The Financial Reporting Council published its its annual inspection and supervision results for 2020/21 covering the seven largest audit firms.

There were 103 audit reviews, and the watchdog found that 29% of those required improvement or significant improvement. A year earlier 33% were said to have needed improvement.

FRC chief executive Sir Jon Thompson said although there was some improvement, “significant change still needs to happen to meaningfully improve audit quality”.

The FRC said inspection results at KPMG did not improve and “it is unacceptable that, for the third year running, the FRC found improvements were required to KPMG’s audits of banks and similar entities”.

Cath Burnet, head of audit at KPMG UK, said: “Whilst we know we have more to do to improve the inspection outcomes, our banking audits are robust and the findings do not call into question our audit opinion.”

Burnet said the company is confident that steps it has taken will result in improvements in future banking audit inspections.

It was also flagged that improvement measures are expected of BDO and Mazars.

Scott Knight at the former said the firm is disappointed with the grades and working hard to address specific findings. He added there is confidence that steps taken will result in sustained improvements.

Mazars is addressing issues identified. David Herbinet at the company said: “We have analysed the findings from the FRC and these have been incorporated into our audit quality plan. We welcome the FRC’s ongoing review, challenge and support, which we see as an invaluable tool for learning, developing and improving”.

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