B2B Payments

Big Four Accountancies Fail UK Audit Test

All of the U.K.’s so-called Big Four accountancy firms — KPMG, PwC, EY and Deloitte — have reportedly failed to reach audit quality standards set by the Financial Reporting Council, Reuters reported this week.

It marks the second year in a row that the Big Four failed the auditing test, while second-tier auditors Grant Thornton, BDO and Mazars also all failed to hit the FRC’s target that 90 percent of audits require only limited improvements.

Only 75 percent of the audits of the U.K.’s largest 350 public firms met that 90 percent performance threshold. The FRC said accountants are failing to take a tougher stance with their clients and question information given to them.

Further, the FRC warned, there had not been any improvement in audit quality between last year and this year.

That conclusion could place further pressure on the U.K. government to force changes in the sector following a string of high-profile corporate collapses leading analysts and members of parliament to question how auditors missed the warning signs.

“At a time when the future of the audit sector is under the microscope, the latest audit quality results are not acceptable,” said FRC Chief Executive Stephen Haddrill in a statement.

Reports noted that politicians proposed industry reforms late last year that have been met with some resistance in the auditing sector. The U.K.’s uncertain exit from the European Union has also placed doubt over how and when such reforms would occur.

Pressure on the industry will continue to rise, too, with the FRC planning to raise the threshold of audit performance from 90 percent to 100 percent starting with June 2019 financial year-end statements.

Grant Thornton is under particular scrutiny. According to reports, only half of the firm’s audits were considered good quality, down from 75 percent last year.

“The FRC has therefore increased its scrutiny of Grant Thornton,” the watchdog said in a statement. It will review a larger number of the firm’s audits in the coming year.

Grant Thornton was the auditor for scandal-ridden cafe chain Patisserie Valerie.

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