In the latest annual report of the UK’s Financial Reporting Council (FRC), CEO Stephen Haddrill notes an “unacceptable deterioration” in the audit quality of KPMG. Grant Thornton also comes in for a tongue lashing for its lack of improvement in audit quality.

The FRC sets audit and ethical standards for audit firms by monitoring audit quality, taking enforcement action and delegating various oversight tasks to the Recognised Supervisory Bodies (RSBs).

“In April 2018 we announced innovative plans to enhance our monitoring of the six largest audit firms, the Audit Firm Monitoring and Supervision approach (AFMAS). This complements our continuing work in reviewing audit quality by seeking evidence about leadership and governance, firm values and behaviour, business models and financial soundness, and risk management. AFMAS aims to reduce the likelihood of systemic deficiencies that could impact on audit quality and ultimately the stability of the financial markets. We do not have specific powers in this area, but it contributes to our work on audit quality,” says Haddrill.

In 2015 the FRC set the auditors of FTSE 350 companies a target that, by 2018/19, at least 90% of those audits inspected should require no more than limited improvements. After a number of years of increasing audit quality, in 2017/18 some 73% of audits achieved this standard, leaving a significant amount of progress required in the final year to meet the target. Click here to read more.