The Financial Reporting Council (FRC) has today published its
Annual Review of Audit
Quality, which calls for all stakeholders of the UK audit
landscape to work together to deliver a thriving market and
profession working in the public interest.
The report covers the inspection and supervision results of audit
firms across the UK Public Interest Entity (PIE) market. These
results are based on a risk-based sample of the audits undertaken
and are published alongside individual reports for Tier 1 audit
firms (BDO, Deloitte, EY, Forvis Mazars, KPMG, and PwC).
The latest inspection results indicate continued improvement in
audit quality, especially among Tier 1 firms. Five out of six
achieved positive audit quality outcomes on 90% or more of their
audits. While Forvis Mazars has shown significant gains in audit
quality, continued effort is needed by the firm to ensure lasting
improvement. BDO continues to demonstrate recurring audit quality
findings and the firm must urgently and robustly reassess how to
improve its audit quality in these areas.
Despite significant investments by the largest firms to enhance
audit quality, there is a risk that the gap between audit quality
delivered by Tier 1 firms and other firms in PIE market
increases. Although some non-Tier 1 firms demonstrate the ability
to deliver high-quality audits, many still struggle to
consistently meet adequate standards and maintain robust quality
management systems.
While the responsibility for a resilient audit profession and
market is not the FRC's alone, it is vital the supervisory
approach of the FRC continues to underpin the importance of audit
quality without creating disproportionate barriers. Developments
in technology, ownership structures, and the business environment
also present challenges and opportunities for the future of the
UK audit landscape. The FRC's Future of Audit Supervision
Strategy project is well underway and will review and build on
our supervisory approach over the next year. The FRC will
continue to work with the whole of the UK audit ecosystem to
ensure its supervisory approach supports a thriving market and
profession working in the public interest.
The FRC's Executive Director of Supervision, , said:
“Audits are an important part of the UK economic and business
ecosystem. They support well-run companies to attract the capital
that is essential to fund innovation and scale businesses to
thrive to the benefit the UK economy.
While audit quality in the UK has improved significantly
since 2018, and compares favourably internationally, the market
should not be complacent. Continued progress, particularly in the
Public Interest Entity market, requires sustained investment and
cultural change, underpinned by robust systems of quality
management.
The audit market is evolving rapidly, shaped by technology,
new business models, and shifting expectations. Our supervisory
approach must evolve with it. But the responsibility for securing
the future of the UK audit market is not ours alone. We call on
audit firms, company directors, investors, professional bodies,
and educators to continue to work with us to build a thriving,
high-quality audit profession that meets the needs of UK
businesses and reinforces public confidence in our markets.”
Read the Overview report and the
firm specific Tier 1 audit firm inspection
results.
Listen to the latest FRC In
Conversation podcast episode with Kate O'Neill, Director of
Stakeholder Engagement and Corporate Affairs, and , Executive Director of
Supervision, in which they discuss the 2025 Annual Review of
Audit Quality.
