FRC review shows challenges in the audit market
In February, the Financial Reporting Council (FRC) published a report summarising the findings of research it commissioned into barriers to entry and growth faced by audit firms across the UK.
The report highlights the two main challenges faced by audit firms:
- Recruiting and retaining staff to do audit work, with 80% of firms surveyed saying that this is a barrier to growth, with particular challenges with recently qualified staff and audit managers.
- Dealing with the growth in regulatory requirements.
While concerning to read, ICAS was not surprised by these findings, as they reflect what we have been told by many of our firms in recent years (particularly smaller firms).
The number of ICAS firms offering audit services has been falling steadily over time. Whilst other factors are at play (including the raising of thresholds, with fewer businesses now requiring an audit), staffing and regulation are definitely significant challenges. There is a threat to the public interest if organisations requiring an audit are not able to find an auditor, with particular difficulties outside the main urban areas, and also with charities.
We have been raising concerns over audit for several years – not just with the FRC, but also in our policy work with responsible civil servants and politicians at both at Westminster and Holyrood.
We are pleased that this report acknowledges the magnitude of the issues, and recognises that a whole system response is required, involving Government, the FRC, the professional bodies, and users of audit services. May we thank the ICAS firms that took part in this research; and We look forward to playing our part in the discussions and actions to follow.
If you have concerns about the current audit market and would like ICAS to report these to the FRC (on an anonymous basis) please get in touch at regulatoryauthorisations@icas.com
