EY pulled up over audit of revenue
FRC criticises EY over the firm's audit of revenue but finds that overall quality of its work has improved
EY has been criticised over its audit of revenue but the UK accounting watchdog has found that the overall quality of work improved.
In its annual inspection of the firm’s audit offering, the FRC found that eight of the 16 audits it reviewed were performed to a good standard with limited improvements required and six audits requiring improvements. Two audits required significant improvements.
Serious failings were found in in relation to evidence obtained from other group auditors, the quality of the audit work performed and evidenced on certain key judgements. The FRC also raised concerns over the audit of revenue, impairment and journals.
In one audit, the FRC discovered weaknesses in the application of substantive analytical procedures in three audits, including a lack of adequate corroboration of management explanations and a failure to set expectations either at all or with sufficient precision.
“We are pleased that the FRC has recognised the steps EY has already taken to improve audit quality and the considerable emphasis we place on our systems of quality control. We also recognise that maintaining our independence is fundamental to confidence in the quality of our audits. We are increasing the size of our independence function and strengthening our practices,” EY said.