Pressure mounts on 'Big Four' auditors after failed UK standards tests

Pressure mounts on 'Big Four' auditors after failed UK standards tests
generic stock business pounds sterling currency notes coins A picture of pound sterling currency notes and coins. Picture: Press Asssociation

A third of company audits by Britain’s leading accounting firms failed a quality test, the country’s accounting watchdog has said, piling further pressure on a sector already being questioned over its competence.

Britain’s Financial Reporting Council (FRC) said 29 of 88 audits inspected needed improvements, with seven of these requiring significant improvements.

The review covered the so-called “Big Four” auditors - Deloitte, EY, KPMG and PwC - as well as smaller firms Grant Thornton, Mazars and BDO.

The FRC had set the firms a raised target of 100% of the audits inspected requiring no more than limited improvements, up from 90% previously, and none passed.

Of the Big Four, KPMG chalked up the most audit quality failures with seven out of 18. Nearly half of Grant Thornton’s audits fell short of the required standard, at four out of nine inspected, the watchdog found.

In their responses to the FRC, both KPMG and Grant Thornton said they were disappointed with the results and were taking action to improve their standards.

Auditors in Britain have come under increased scrutiny in recent years after high-profile corporate failures at builder Carillion, retailer BHS and an accounting scandal at cafe chain Patisserie Valerie.

The FRC fined Grant Thornton £3m (€3.3m) this month for ethics failures on its audit of drinks retailer Conviviality.

It also recommended a record fine of £15m for Deloitte for “serious and serial failings” in its audit of technology company Autonomy.

“We are concerned that firms are still not consistently achieving the necessary level of audit quality. While firms have made some improvements, and we have observed instances of good practice, it is clear that further progress is required,” said David Rule, the FRC’s executive director of supervision.

-Reuters

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