UK: number of audits requiring significant improvement too high says AIU

The Professional Oversight Board, part of the Financial Reporting Council, yesterday published the Audit Inspection Unit’s Annual Report for 2009/10: see here (pdf).

The AIU reviews [a] the quality of the statutory audits of listed and other major public interest entities that fall within its scope and [b] firms’ policies and procedures supporting audit quality. The 2009/10 report provides an overview of the activities and findings of the AIU for the year ended 31 March 2010. With regard to the quality of audits by major firms the report finds:

... major firms have policies and procedures in place to support audit quality that are generally appropriate to the size of the firms and the nature of their client base. Nevertheless, improvements to these policies and procedures have been recommended at all firms. Notwithstanding the quality of firms’ policies and procedures, the number of audits assessed as requiring significant improvement at major firms (eight audits or 11% of audits reviewed at major firms excluding follow‐up reviews) is too high. Firms are therefore not always consistently applying their policies and procedures on all aspects of individual audits.

... a higher proportion of audits conducted by smaller firms require significant improvement. Six of the 11 smaller firm audits reviewed in 2009/10 (excluding follow–up reviews) were assessed as requiring significant improvement (2008/9: five of the 11 audits reviewed). Firms should not undertake audits unless they have the appropriate level of resources and expertise to ensure they are performed to an acceptable standard.

The AIU believes consideration should be given to establishing competency requirements specifically for auditors of listed and major public interest entities".

UK: AIU publishes overview of audit quality inspections

The Audit Inspection Unit - part of the Financial Reporting Council - has published an overview of its 2008/09 audit quality inspections: see here (pdf). The AIU notes (on p. 2): 

The AIU considers the overall quality of major public company audit work to be fundamentally sound. For each major firm the AIU has recommended to the relevant Audit Registration Committee that the firm’s registration to conduct audit work be continued. The AIU was generally satisfied with the basis on which significant audit judgments were made on the individual audits reviewed at the firms. It considered that audit procedures had generally been performed to a good or acceptable standard. However, the AIU identified certain areas at each major firm where improvements were in its view needed in order to enhance audit quality".

UK: Audit Inspection Unit reports published

The Professional Oversight Board, part of the Financial Reporting Council, has published inspection reports by the Audit Inspection Unit for 2008/9 in respect of Grant Thornton UK LLP (here); Horwath Clark Whitehill LLP (here); KPMG LLP and KPMG Audit PLC (here); and PricewaterhouseCoopers LLP (here). In general, the reports indicate that audit procedures were being performed to a good or acceptable standard in the audits surveyed. Nevertheless, in several of the audits reviewed the AIU identified the need for improvements in the obtaining and/or recording of audit evidence.