FRC highlights flaws in audit engagement review processes
Thematic review from FRC's audit quality review team finds that while reviewers do bring standards of work up, weaknesses still creep through
THE FRC has expressed concerns that firms fail to maintain a consistently high standard of auditing, and highlighted the role of engagement quality control.
A thematic review undertaken by the audit watchdog’s quality review team identified weaknesses in a tenth of audits it reviewed which the firms’ enagagement quality control process had failed to identify.
It added firms can and should do more to assess the impact of the engagement quality control review and, where appropriate implement additional procedures to reduce the occurrence of audit weaknesses that are not identified.
The FRC said audit firms should consider whether their enagagement quality review eligibility criteria include adequate levels of technical expertise, experience and authority for audits of listed entities and/or in specialist sectors, consistent with that required by the individual signing the audit report.
It should also be clear to the audit committee that the enagagement revewer is not a member of the audit team but part of the firm’s quality control processes and that actions are needed to ensure that on all audits the reviewer’s involvement is timely and effective in maintaining audit quality.
Executive director at the FRC’s conduct division Paul George said: “The engagement quality control review plays an important role in the quality control process on an audit and is key to safeguarding audit quality. It is imperative that firms’ do more to evaluate the effectiveness of the EQC review and for firms to require EQCRs to obtain formal feedback on their performance.”