Mid-tier struggles with regulatory change, says FRC

Mid-tier accounting firms are struggling to cope with the wave of regulation
because they lack the resources to implement change, the FRC’s Audit Inspection
Unit has said.

Releasing it annual report on audit quality, the first to include reports on
mid-tier firms, the AIU said that because these firms lacked the scale of the
Big Four their resources had been ‘stretched’ as they prepared for new ethical
standards, international auditing standards and IFRS.

‘These regulatory changes require significant changes to systems. Whether you
have 8,000 employees or 15,000 employees you have to make the same changes, so
it has been more difficult for firms outside the Big Four,’ said AIU director
Andrew Jones.

Jones added that the issues the AIU had raised with the mid-tier firms were
far more diverse than among the Big Four as the smaller firms were a ‘less
homogenous’ group.

Jones would not go so far as to say that there was a gap in audit quality
between the Big Four and the Mid-tier, but the AIU’s comments raise serious
questions around this issue.

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