Overall, 71% of audits were deemed good or generally acceptable, the same result as in 2022/23.
This included a strong performance by the larger audit firms with 88% of non-Public Interest Entity (PIE) audits carried out by larger firms considered good or generally acceptable.
Outside of the larger firms, most firms reviewed this year were different to those reviewed last year due to most firms being on a six-year review cycle, which makes year on year comparisons very difficult.
The results were based on nearly 500 audit monitoring visits carried out by ICAEW’s Quality Assurance Department in 2023/24. Reviewers were asked to select the audits considered to be the most complex and challenging so the overall result is not necessarily representative of average audit quality, which is likely to be higher.
Rama Krishnan, Chair of ICAEW’s Audit Registration Committee, said:
“While there has been no deterioration in the overall result this year, it is slightly disappointing that overall performance has not improved. However, we recognise that different firms are reviewed each year which makes it difficult to make year on year comparisons.
“There are indications that audit quality is being challenged by changing market conditions with an unprecedented movement of complex audits from larger to smaller firms which is requiring those smaller firms to move quickly to upscale their risk and quality processes. Greater visibility of this movement is important so that the Institute can check proactively that firms have the right expertise and experience to take on new larger audits.
“That is why the Committee fully supports the proposal by the ICAEW Regulatory Board to change the Audit Regulations to require firms to report the acceptance of new audits falling within certain criteria.”
ENDS
Notes to editors:
CONTACT: ICAEW media office tom.mackintosh@icaew.com or 07866 853841
You can view the report in full here.
The six (up to 2022/23: seven) largest audit firms, FRC Tier 1 firms, are subject to an annual review of their PIE audit work by the FRC and to non-PIE audit file reviews by ICAEW every one or two years. Other PIE audit firms, FRC Tiers 2 and 3 firms, are subject to review of their PIE audit work and non-PIE audit work by the FRC and ICAEW, respectively, over cycles of between two and six years.
- Tier 1: Firms with the largest share of the UK PIE and Major Local Audit markets, which together audit approximately 1,290 PIEs, including the majority of UK-incorporated FTSE 350 entities.
- Tier 2: These firms will ordinarily have a significant portfolio of PIE audits (usually at least ten) and the FRC also take into account the nature of the firm’s PIE audits and other risk factors that may apply, for example, the firm’s growth plans or specific risks to audit quality.
- Tier 3: Firms which audit fewer than five PIEs.
- Tier 4: Firms that are looking to enter the PIE audit market.
ICAEW’s role as an improvement regulator
Our role as an improvement regulator is to strengthen confidence and trust in those regulated by ICAEW. We do this by enabling, evaluating and enforcing the standards expected by the profession, oversight regulators and government. ICAEW’s regulatory and disciplinary roles are separated from ICAEW’s other activities through internal governance so that we can monitor, support or take steps to ensure change if standards are not met. These roles are carried out by the Professional Standards Department and overseen by the independent ICAEW Regulatory Board (IRB).
Our role is to:
- authorise firms and individuals to undertake work regulated by law: audit, local audit, investment business, insolvency and probate;
- support professional standards in general accountancy practice through our Practice Assurance scheme;
- provide robust anti-money laundering supervision and monitoring;
- monitor registered firms and individuals to ensure they operate in accordance with laws, regulations and expected professional standards;
- investigate complaints and hold ICAEW Chartered Accountants and students, ICAEW-supervised firms and regulated and affiliated individuals to account where they fall short of standards;
- respond and comment on proposed changes to the law and regulation; and
- educate through guidance and advice to help ICAEW’s regulated community comply with laws, regulations and expected professional standards.