The FRC assessed 84% of Deloitte’s audits that it reviewed as requiring no more than limited improvements, compared with 76% in 2017/18. Of the FTSE 350 audits reviewed this year, the FRC assessed 75% as achieving this standard compared with 79% in 2017/18.
The FRC said inspection results show only modest improvements in audit quality. Key individual review findings related principally to the need to:
- Exercise greater professional scepticism in the audit of potential prior year adjustments and related disclosures in the annual report and accounts.
- Strengthen the extent of challenge of key estimates and assumptions in key areas of judgement, including asset valuations and impairment testing.
- Improve the consistency of the quality of the firm’s audit of revenue.
- Achieve greater consistency in the audit of provisions and liabilities.
The FRC had no significant findings arising from its firm-wide work on internal quality monitoring, engagement quality control reviews and independence and ethics. Given the key individual review findings noted above, however, this would indicate that the firm’s quality control procedures have not been sufficiently effective to achieve the necessary improvement in audit quality.