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June 12, 2012

FRC calls on firms to maintain quality controls

The UK accounting regulator would like audit firms to establish centralised safeguards to ensure audit quality is maintained as firms look for efficiency gains to mitigate fee pressure.

The Financial Reporting Council’s (FRC) said firms are facing significant pressures in the current economic environment and that substantial reductions in audit fees have occurred in a number of recent audit tenders for large listed entities.

“While acknowledging that fee pressures are a commercial reality that cannot be ignored, we remain concerned that audit efficiency is becoming progressively more important to firms as audited entities seek to reduce fees,” the FRC said.

The regulator called on firms to maintain appropriate controls to ensure audit efficiency gains do not impair audit quality, particularly where the extent of audit procedures performed are dependent on judgments relating to materiality, scoping or sample sizes.

The FRC reviewed 94 audits conducted by some of the largest UK accounting firms in its 2011/12 inspection report, which was released today.

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