ICAS ICAS logo

Quicklinks

  1. About Us

    Find out about who we are and what we do here at ICAS.

  2. Find a CA

    Search our directory of individual CAs and Member organisations by name, location and professional criteria.

  3. CA Magazine

    View the latest issues of the dedicated magazine for ICAS Chartered Accountants.

  4. Contact Us

    Get in touch with ICAS by phone, email or post, with dedicated contacts for Members, Students and firms.

Login
  • Annual renewal
  • About us
  • Contact us
  • Find a CA
  1. About us
    1. Governance
  2. Members
    1. Become a member
    2. Newly qualified
    3. Manage my membership
    4. Benefits of membership
    5. Careers support
    6. Mentoring
    7. CA Wellbeing
    8. More for Members
    9. Area networks
    10. International communities
    11. Get involved
    12. Top Young CAs
    13. Career breaks
    14. ICAS podcast
    15. Newly admitted members 2022
    16. Newly admitted members 2023
  3. CA Students
    1. Student information
    2. Student resources
    3. Learning requirements
    4. Learning updates
    5. Learning blog
    6. Totum Pro | Student discount card
    7. CA Student wellbeing
  4. Become a CA
    1. How to become a CA
    2. Routes to becoming a CA
    3. CA Stories
    4. Find a training agreement
    5. Why become a CA
    6. Qualification information
    7. University exemptions
  5. Employers
    1. Become an Authorised Training Office
    2. Resources for Authorised Training Offices
    3. Professional entry
    4. Apprenticeships
  6. Find a CA
  7. ICAS events
    1. CA Summit
  8. CA magazine
  9. Insight
    1. Finance + Trust
    2. Finance + Technology
    3. Finance + EDI
    4. Finance + Mental Fitness
    5. Finance + Leadership
    6. Finance + Sustainability
  10. Professional resources
    1. Anti-money laundering
    2. Audit and assurance
    3. Brexit
    4. Business and governance
    5. Charities
    6. Coronavirus
    7. Corporate and financial reporting
    8. Cyber security
    9. Ethics
    10. Insolvency
    11. ICAS Research
    12. Pensions
    13. Practice
    14. Public sector
    15. Sustainability
    16. Tax
  11. CPD - professional development
    1. CPD courses and qualifications
    2. CPD news and updates
    3. CPD support and advice
  12. Regulation
    1. Complaints and sanctions
    2. Regulatory authorisations
    3. Guidance and help sheets
    4. Regulatory monitoring
  13. CA jobs
    1. CA jobs partner: Rutherford Cross
    2. Resources for your job search
    3. Advertise with CA jobs
    4. Hays | A Trusted ICAS CA Jobs Partner
    5. Azets | What's your ambition?
  14. Work at ICAS
    1. Business centres
    2. Meet our team
    3. Benefits
    4. Vacancies
    5. Imagine your career at ICAS
  15. Contact us
    1. Technical and regulation queries
    2. ICAS logo request

Latest audit inspection reports released by the FRC

Business women discussing
  • LinkedIn (opens new window)
  • Twitter (opens new window)
By Anne Adrain, Head of Sustainability and Assurance

12 July 2019

Key points:

  • The 2018/19 FRC audit inspection reports reveal that only 75% of FTSE 350 audits were of acceptable quality.

  • 25% of the audits inspected were assessed as below an acceptable standard.

  • Among the key failings were the inability to sufficiently challenge management assumptions and a lack of professional scepticism.

The FRC has issued its 2018/19 inspection reports on the quality of FTSE 350 audits.

Summary

The UK Financial Reporting Council (FRC) has issued its latest round of audit inspection reports. At a time when audit is under an incredible amount of scrutiny, the overall assessment is that, in total, only 75% of FTSE 350 audits were either good or required limited improvements, below the FRC’s target of 90%. In summary, there has been no improvement on last year’s overall results. Furthermore, 25% of the audits assessed were judged to be below an acceptable standard

The FRC has stressed the importance of audit which plays a vital role in establishing investor confidence in UK companies and is concerned that poor quality audit work remains unacceptably common.

In the latest audit inspection reports for 2018/19, which relate principally to audits of companies’ December 2017 year-ends, the figure of 75% shows little change when compared to the 73% achieved in 2017/18. None of the individual firms achieved the FRC’s audit quality target for 90% of FTSE 350 audits.

Each of the seven firms inspected, which includes the Big Four Firms as well as BDO, Grant Thornton and Mazars, has committed to specific actions to enhance audit quality including, for the worst performers, detailed audit quality improvement plans. The FRC will continue to assess the success of these initiatives and secure further action if necessary.

The FRC found cases in all seven firms where auditors had failed to challenge management sufficiently on judgemental issues. This has been a recurring theme over a number of years and it may be a result of a number of factors including the absence of professional scepticism in evaluating evidence presented by company management, tight reporting deadlines and the complexity of the judgements involved. Familiarity is also a factor arising from long-standing audit relationships, particularly if the auditor considers that the company is “the client”, as opposed to the shareholder or investor.

Positive developments

The inspection reports have highlighted positive actions and examples of good practice compared to previous years. These include the use of audit data analytics in the audit process and the involvement of specialists in the audit have also been praised.

Summary of key findings in reports

  • The absence of professional scepticism in the audit of potential prior year adjustments and related disclosures in the annual report and accounts.
  • A lack of challenge over key estimates and assumptions in key areas of judgement, including asset valuations, impairment testing and intangible assets.
  • Inconsistent quality in the audit of revenue.
  • Inconsistent quality in the audit of provisions and liabilities, including sufficiently challenging management’s assumptions.
  • A lack of challenge and evidence in the audit of long-term contracts.
  • More rigorous procedures are needed in the audit of revenue and inventories for some retailers.
  • Tougher systems and procedures when evaluating whether to undertake non-audit services.
  • A lack of consistency in the group audit team’s oversight of component audit teams.
  • A need for improvement in the quality of the audit of the valuation of financial instruments in financial services entities and a stronger approach to the audit of loan loss provisions in these entities.
  • Improvements are needed in the audit of going concern.
  • The audit of the completeness and evaluation of prior year adjustments should be improved.
  • A need for improved testing of controls including IT general controls.
2022-11-mitigo 2022-11-mitigo
ICAS logo

Footer links

  • Contact us
  • Terms and conditions
  • Modern slavery statement
  • Privacy notice
  • CA magazine

Connect with ICAS

  • Facebook (opens new window) Facebook Icon
  • Twitter (opens new window) Twitter Icon
  • LinkedIn (opens new window) LinkedIn Icon
  • Instagram (opens new window) Instagram Icon

ICAS is a member of the following bodies

  • Consultative Committee of Accountancy Bodies (opens new window) Consultative Committee of Accountancy Bodies logo
  • Chartered Accountants Worldwide (opens new window) Chartered Accountants Worldwide logo
  • Global Accounting Alliance (opens new window) Global Accounting Alliance
  • International Federation of Accountants (opens new window) IFAC
  • Access Accountancy (opens new window) Access Acountancy

Charities

  • ICAS Foundation (opens new window) ICAS Foundation
  • SCABA (opens new window) scaba

Accreditations

  • ISO 9001 - RGB (opens new window)
© ICAS 2022

The mark and designation “CA” is a registered trade mark of The Institute of Chartered Accountants of Scotland (ICAS), and is available for use in the UK and EU only to members of ICAS. If you are not a member of ICAS, you should not use the “CA” mark and designation in the UK or EU in relation to accountancy, tax or insolvency services. The mark and designation “Chartered Accountant” is a registered trade mark of ICAS, the Institute of Chartered Accountants of England and Wales and Chartered Accountants Ireland. If you are not a member of one of these organisations, you should not use the “Chartered Accountant” mark and designation in the UK or EU in relation to these services. Further restrictions on the use of these marks also apply where you are a member.

ICAS logo

Our cookie policy

ICAS.com uses cookies which are essential for our website to work. We would also like to use analytical cookies to help us improve our website and your user experience. Any data collected is anonymised. Please have a look at the further information in our cookie policy and confirm if you are happy for us to use analytical cookies: