30 October 2020
The Financial Reporting Council (FRC) has today published its inspection findings into the quality of major local audits in England for the financial year ended 31 March 2019. This is the first such report published by the FRC.
Of the 271 major local audits in the FRC’s inspection scope, the FRC reviewed 15 audits across the seven largest audit firms, covering both the financial statement opinion and the Value for Money arrangements conclusion work.
For the financial statement opinion, two audits reviewed by the FRC required significant improvements and seven required improvements. None of the Value for Money conclusions reviewed required more than limited improvement.
Some firms are still not consistently achieving the necessary level of audit quality and therefore need to make further progress. For two firms, Grant Thornton and Mazars, the level of audit quality requires significant improvement, and those firms should perform a detailed Root Cause Analysis of the issues the FRC has identified and put in place an audit quality action plan across local audits to address the FRC’s findings.
The key areas of concern requiring action by some audit firms were the valuation of property (including investment property), sufficiency of audit procedures over the occurrence and completeness of expenditure, the response to fraud risks, the impairment of receivables, valuation of pension assets and the effectiveness of the Engagement Quality Control review.