BDO and Mazars had been criticised by the UK accounting regulator for the “unacceptable” high quality of their audits after the mid-tier corporations obtained the worst scores in business inspections for the second yr working.
The inspection outcomes underline the problem mid-tier accounting corporations face as they attempt to win a better share of a market dominated by the Big Four — Deloitte, EY, KPMG and PwC — whereas guaranteeing their work meets the regulator’s necessities.
Only 58 per cent of the 12 BDO audits inspected had been deemed as much as scratch by the Financial Reporting Council, a slight enchancment on final yr’s rating of 44 per cent. Half of the eight Mazars audits examined had been of an appropriate commonplace, the watchdog discovered.
KPMG recorded a big enchancment, with 84 per cent of its audits within the high class, in contrast with 59 per cent final yr when it was singled out for criticism by the FRC.
The enchancment in KPMG’s outcomes “is promising, but is not yet a trend”, the FRC mentioned, including that it might proceed to “closely monitor” the agency’s banking audits, which scored poorly within the earlier three years.
Across the seven “tier one” accounting corporations, 25 per cent of audits inspected had been deemed to want both some enchancment or important enchancment, in contrast with 29 per cent in 2021 and 33 per cent in 2020.
“While it is encouraging to see some improvement in audit quality at the largest audit firms, consistent, long-term improvement is still required across the market,” mentioned Sir Jon Thompson, chief government of the FRC.
The watchdog has been attempting to enhance the standard of audits of enormous UK corporations after auditors failed to boost purple flags forward of high-profile company failures, reminiscent of building firm Carillion and bakery chain Patisserie Valerie. The authorities has additionally promised reforms to assist mid-tier corporations compete with the Big Four oligopoly by requiring giant corporations to rent a smaller auditor to hold out a part of their evaluation.
Among the opposite corporations, 83 per cent of PwC’s audits got the very best rating, whereas Deloitte obtained 82 per cent.
EY’s outcomes dipped, with solely 65 per cent of its audits receiving the most effective rating in contrast with 79 per cent a yr in the past. However, not one of the 17 EY audits inspected had been within the backside class, the place the FRC finds important enhancements are wanted.
All 5 audits by Grant Thornton, the UK’s sixth-largest auditor by income, had been deemed as much as scratch. The agency has improved its scores previously two years, however in contrast to fellow mid-tier corporations BDO and Mazars it has not tried to develop its share of the audit marketplace for giant corporations.
Both BDO and Mazars mentioned they had been investing to extend their assets and the standard of their work.