Big Four accountancy firm KPMG has been criticised by the Financial Reporting Council for an “unacceptable” failure to improve its audits of major banks.
In its annual review of audit quality at the major accountancy firms, the FRC found that 29% required improvement or significant improvement, down from 33% the previous year.
However, KPMG was singled out by the FRC after it failed to improve its audit quality results.
“It is unacceptable that, for the third year running, the FRC found improvements were required to KPMG’s audits of banks and similar entities,” the FRC said.
The FRC said it would be “closely monitoring KPMG’s actions” given the “systemic importance of banks to the UK economy”.
KPMG has agreed to deliver additional audit improvement activities this year, over and above its existing audit quality improvement plan.
Cath Burnet, head of audit at KPMG UK, said: “Much of our recent investment made as part of our audit quality transformation programme relates to banking audits, where we recognise that action taken as a result of previous inspections has not yet consistently yielded the high standards rightly expected of us.
“Whilst we know we have more to do to improve the inspection outcomes, our banking audits are robust and the findings do not call into question our audit opinions – and we are confident that the steps we have taken to date will result in improvements in future banking audit inspections.”
The FRC also said key mid-tier players BDO and Mazars needed to “put in place additional measures to support high quality audit as they continue to grow”.
Scott Knight, head of audit at BDO, said the firm was “very disappointed with this year’s grades and are working hard to address the specific findings”.
David Herbinet, head of audit at Mazars, said: “We are disappointed by the findings in this year’s FRC report and we are addressing the issues which have been identified.”
The scathing report into the quality of the audits carried out by the major accountancy firms comes as the government prepares to introduce sweeping changes to the sector following a series of accounting scandals.
To contact the author of this story with feedback or news, email James Booth