by Daniel Milroy Maher
The UK Financial Reporting Council (FRC) has called for firms to "reinforce their efforts on professional scepticism" in the latest Audit Quality Inspection Report for 2012/2013.
The FRC stressed "further improvements are needed, particularly in smaller audits".
"Initiatives to reinforce the importance of exercising sufficient professional scepticism appear to be working although progress is not uniform," the regulator added.
However, the FRC reported an improvement in overall audit quality in the past year but added enhancements are needed in auditor independence and ethical issues. To counter this issue the FRC recommended firms reassess the capability of their "independence and ethics procedures and the training they provide to staff at all levels".
Other key findings reported include:– A rise in the standard of audit work, with 59% of audits inspected categorised as good or acceptable with minor improvements required;– The majority (79%) of FTSE 350 audits inspected were in these top bands; and,– Firms should reconsider the robustness of their internal monitoring processes and the extent to which they contribute to an improvement in overall audit judgments.
The report also showed 15%, which is a 5% increase from 2011/12, of audits required "significant improvement" with 87% of those being for audits of entities outside the FTSE 350.