Audit choice risks remain despite recommendations, FRC admits

The Financial Reporting Council has warned that the risks posed by audit market concentration are still prevalent, despite the recommendations put forward by its Market Participants Group.

In its third progress report on the implementation of the recommendations, the FRC noted that while there has been significant developments based on the MPG’s suggestions, some measures will have limited impact in the short term and the risks of market concentration continue.

‘Despite the progress that has been made, the FRC continues to have significant concerns about the risks posed by audit market concentration and believes that these risks are likely to continue for the medium to long term,’ said FRC chief executive Paul Boyle.

Since the last report, the CCAB has issued a voluntary code of practice on the disclosure of audit profitability and the FRC’s Audit Inspection Unit has published reports on audit firms that have been subject to a full review.

The FRC said that the majority of the recommendations had now been implemented, with the rest expected to be in place in the next six months. However, work was still needed on an international level on the oversight on global networks.

Further reading

Choice in the UK Audit Market: Third Progress Report