The FRC assessed 77% of PwC’s audits that it reviewed as requiring no more than limited improvements, compared with 82% in 2017/18. The picture was worse in the FTSE 350 arena. Of PwC’s FTSE 350 audits reviewed by the FRC, it assessed 65% as achieving this standard compared with 84% in 2017/18.

The FRC said: “We consider the notable decline in inspection results, particularly for FTSE 350 audits, by comparison to prior years to be unsatisfactory and have required the firm to take prompt and targeted action to address this decline.”

Key individual review findings related principally to the need to:

  • Improve the audit team’s challenge and supporting evidence in relation to the audit of long-term contracts.
  • Improve the consideration and challenge of growth assumptions in relation to the impairment of goodwill and other assets.
  • Strengthen the consideration and challenge in relation to management’s estimation of certain provisions.
  • Enhance the audit work performed for aspects of revenue and inventory for retailers. We had no significant findings arising from our firm-wide work on internal quality monitoring and engagement quality control reviews.

The firm-wide issues identified concerned the need to:

  • Strengthen the firm’s systems and procedures relating to non-audit services approval.

Given the key individual review findings noted above, the FRC said this would indicate that the firm’s quality control procedures have not been sufficiently effective to achieve the necessary improvement in audit quality. “We will monitor closely the promptness and effectiveness of the firm’s actions. Should the firm’s response not address our concerns adequately, we will take further action,” said the FRC.