UK Accountants Fail Audit Quality Test
Businesses and self-employed workers across the UK rely on qualified accountants to oversee their financial activities. Set yourself up with an experienced accountant and you can expect a certain level of quality and performance.
Unfortunately, evidence suggests a surprising proportion of accountants simply aren’t making the grade.
Specifically, a study carried out by the International Forum of Independent Audit Regulators found that the number of accountants failing awarded quality tests fell by 3% last year. Unfortunately, this still means that 37% of all UK accountants are failing audit quality tests. A figure that’s been called completely unacceptable by business and financial watchdogs.
Published in the IFIAR’s seventh annual survey of audit inspection findings, the figures suggest things are slowly but surely moving in the right direction. Audit quality may be improving, but nowhere near fast enough.
In any case, things aren’t looking nearly as worrying as they did five years ago. Back in 2014, a study found that no less than 47% of audits contained major deficiencies. The figure fell to 40% by 2017 and has since fallen a further 3% to reach 37%.
The IFIAR stated that while the decline represents forward movement, significant improvements must still be made.
“While the downward trend is encouraging, the recurrence and level of findings reflected in the survey indicate a lack of consistency in the execution of high-quality audits and the need for a sustained focus on continuing improvement,” the report stated.
The IFIAR also emphasised the importance of interpreting the report’s findings with caution, as they do not provide any detailed information on any given firm’s specific audit quality or improvements made. The report was produced and published using nothing but numerical information and did not take into account a variety of factors regarding the audit deficiencies identified.
Common Issues Identified
For the benefit of its members, the IFIAR report included information on initiatives that have been undertaken for the purpose of improving audit quality. Examples of which include publications produced for auditors, roundtables with stakeholders and quality improvement workshops. It was also revealed that accounting estimates (including fair measurement) represented the most common slip up area of all, accounting for around 28% of deficient audits in 2018. This was followed by internal control testing issues at 15%, followed by adequacy of financial statement presentation and disclosure at 13%.
The results were collated following the conduction of a survey including 45 of IFIAR’s 55 member regulators, which questioned the firms’ quality control systems when auditing public listed companies. Audit deficiencies were defined as any issue serious enough to suggest that the firm carrying out the audit failed to obtain enough supplementary evidence to validate its opinion.
The six global audit firm networks are BDO International, Deloitte Touche Tohmatsu, Ernst & Young Global, Grant Thornton International, KPMG International Cooperative and PricewaterhouseCoopers International.
The Financial Reporting Council, the IFIAR’s UK member, reported that in 2018, at least 27% of all of its inspections showed signs of significant deficiencies. This would amount to an increase of 19% compared to 2017.