Banks’ audits below average quality
The Financial Reporting Council (FRC) has published its 10th annual report on audit quality in the UK, having found that the quality of auditing is generally good – 60% of audits were good or required only limited improvements.
However, quality is not consistent across all audit firms and types of company. Most significantly the quality of bank and building society audits continues to fall below average, in particular because of insufficient testing and challenge of the provision banks have been making against possible losses on their loans.
In all, 15% of audits inspected by the FRC required significant improvements including one FTSE 100 company; the council also found breaches of the rules on auditor independence and continuing problems in the audit of letterbox companies.
Returning to the banks, a thematic inspection of auditing across the sector is underway and the FRC’s conclusions will be published in November.