KPMG audit quality criticised in FRC review
The quality of audit work undertaken by the top six firms has improved with only KPMG found to have audits in need of significant improvement, the FRC said Thursday.
Out of the 104 audits were inspected for 2015/16 – 89 of which were undertaken by the Big Four – only two audits, undertaken by KPMG, were identified as needing significant improvement. Of the remainder of KPMG’s audits, 14 were identified as good and six required improvements.
In an unusual move, the FRC released lengthy individual reports for PwC, Deloitte, KPMG, EY, Grant Thornton and BDO but did not release any overarching analysis or recommendations. Overall, 77% of audits were identified as requiring only limited improvements.
The FRC is targeting that all the firms it inspects to make continuous improvements such that, by 2019, at least 90% of FTSE 350 audits reviewed will be assessed as requiring no more than limited improvements.
FRC executive director for audit Melanie McLaren said: “This year’s reports on our reviews of individual audit firms reflect the FRC’s focus on promoting continuous improvement in audit quality.
“For the first time, we asked the firms to carry out a root cause analysis into each of our key findings before developing proposed actions and discussing these with us. The firms responded positively to this request and engaged in a constructive dialogue with us on the outcome of their work and how this had informed the actions they intend to take. We are pleased that the firms have recognised the opportunity to demonstrate their commitment to audit quality.
“We will be reviewing the implementation of firms’ actions and the extent to which they are effective in practice in enhancing audit quality.”
Source: AccountancyAge
