The FRC reported that 77% of the audits inspected were of high quality or required limited refinement, a 10% increase from the 67% recorded in 2020, marking a four-year trend of improvement.

None of the audits conducted by five of the biggest firms necessitated significant improvements, with the total number of audits needing such attention falling from 7% in 2021/22 to 3% this year.

The report highlighted Mazars and BDO for their progress following initiatives to enhance audit quality. BDO’s audit inspections demonstrated a substantial jump, with 69% of audits regarded as good or requiring only limited improvement, up from 58% the previous year. Mazars also saw a rise, with 56% of its audits achieving the desired standards, a 6% increment from the earlier 50%.

Despite these positive trends, the FRC expressed disappointment with the overall results and the slower progress in certain areas, saying both firms continue to perform below their peers, underscoring the need for continued efforts to enhance audit standards.

The report also highlights how management and audit committees play an integral role in the audit ecosystem and sets out examples of steps that audit committees can take to drive responsive and high-quality audits.

Sarah Rapson

The FRC’s deputy chief executive, Sarah Rapson said: “It is encouraging to see the ongoing and consistent improvement in audit quality at the largest audit firms.

“It is also encouraging to see progress at both Mazars and BDO. It is, however, disappointing that there are still significant areas of their work that need to be addressed and the FRC will continue its increased level of supervision, requiring them to take further action to raise the quality of their audits in certain areas.

“Improving audit quality is at the heart of our purpose to promote integrity and choice in the audit market, which plays a vital role in ensuring confidence in the UK economy.

“By embracing our role as an improvement regulator which acts in a fair and proportionate way, we are committed to creating a more resilient audit market with the capability and capacity to continue to work effectively in the public interest.”