FRC warns of critical fault lines in NHS audit market

The Financial Reporting Council (FRC) has released initial findings from its ongoing examination of the NHS audit market, revealing significant obstacles that could undermine the sector’s resilience.

Launched in July 2024, the study highlights concerns around the availability of auditors, capacity constraints, and inefficiencies in procurement processes. These findings come as NHS providers and Integrated Care Boards (ICBs) face mounting pressures to ensure financial accountability.

Auditor availability has emerged as a critical issue. A survey conducted as part of the study revealed that 87% of NHS organisations are anxious about their options for securing future audit services. The limited choice of auditors is particularly acute in certain regions of England, where capacity constraints and geographic disparities exacerbate the problem. #

Audit firms themselves report challenges, including tight scheduling demands, conflicts of interest, and difficulties in recruiting qualified professionals. These hurdles, the report suggests, are stifling efforts to expand audit capacity and leaving NHS bodies with restricted options.

Adding to these challenges is the issue of under-resourced NHS finance teams, which are often unable to produce the high-quality financial data essential for robust audits. This limitation risks creating a feedback loop where audit quality suffers, further straining the already stretched resources of both audit firms and NHS bodies.

The FRC’s findings also cast a spotlight on the procurement framework for NHS audits. Audit firms have criticised the tendering process as overly complex and poorly timed, with insufficient early engagement from NHS bodies. This lack of coordination, they argue, hampers their ability to tailor services effectively.

Meanwhile, stakeholders within the NHS remain divided on the value and purpose of audits. While some organisations prioritise meeting deadlines and regulatory requirements, others question the relevance of certain aspects, such as value-for-money assessments. This divergence underscores the need for clearer definitions and alignment of objectives.

The FRC has called for wide-ranging stakeholder engagement to address these issues, with its final report expected in Spring 2025.

Among the potential recommendations being explored are measures to:

• simplify procurement processes,
• enhance support for NHS finance teams, and
• incentivise audit firms to expand their operations into underserved regions.

Aligning audit objectives across stakeholders is also expected to feature prominently in the final recommendations.