A UK Financial Reporting Council (FRC) audit quality review (AQR) of Baker Tilly UK found half the audit’s required "significant improvements".
The FRC reviewed a total of six audits between 2012 and 2014, and found two to be "good" with limited improvements required, one was ranked as needing improvements, and the remaining three required significant improvements.
In comparison just one audit was ranked good in an AQR between 2010 and 2012, with the remainder classed as requiring improvements.
The FRC said changes in the AQR results could be reflective of changes to the size, complexity and risk of the individual audits selected for review.
Therefore it said changes in gradings between AQRs were not necessarily indicative of any overall change in audit quality.
The FRC went on to say that the FRC was worried Baker Tilly UK had not accepted certain elements of its findings.
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By GlobalDataThe reason for this is that it on some occasions the reviewed audit teams appeared more focused on explaining why the audit work was of acceptable quality rather than focusing on the improvements it could make.
Despite this, the FRC did note the firm had taken a number of steps to improve audit quality, based on the previous AQR.
Areas in need of improvement
Some of the areas of concern highlighted in the AQR included three of the audits displaying insufficient procedures over the reliability of the data produced by the entity being audited.
The AQR also found issues with the auditing of controls, such as the audit of IT controls, where the AQR found there was insufficient testing on three occasions.
The AQR also identified a number of disclosure errors and omissions that were not identified by the audit team concerning related party transactions, dividends and segmental disclosures.
The AQR also found that, in all audits reviewed, there was no evidence that the audit team had asked the Audit Committee to correct unadjusted misstatements.
Although the AQR says the firm has been reluctant to accept some of the conclusions drawn, in its official response Baker Tilly UK said "We welcome the Audit Quality Review Team’s report and we are already addressing all of the findings that will contribute to an improvement in audit quality."
During the process of the researching the AQR, Baker Tilly UK bought RSM Tenon, a fact acknowledged in the report, however Baker Tilly UK has since opted to join the RSM International.
Related story
Baker Tilly UK opts for RSM International
Related link
UK Financial Reporting Council
