Grant Thornton audits fall short of FRC standards

Grant Thornton audits fall short of FRC standards

The Financial Reporting Council (FRC) has criticised Grant Thornton after its Audit Quality Inspection revealed five out of six of the firm’s local audits fell below the expected standard.

Grant Thornton was singled out by the accountancy regulator after it investigated 15 major audits of health authorities and councils carried out by the accountancy industries biggest players - Grant Thornton, EY, Mazars, BDO, Deloitte, KPMG and PwC.

The report found that 60% of the audits fell below the standard expected by the regulator.

The FRC said Grant Thornton should update its ongoing action plan with the findings and required actions from this inspection cycle.

At least two key findings were identified on all audits requiring improvement and therefore areas of focus are the audit of property valuation, assessment and subsequent testing of fraud risks, audit procedures over the completeness and accuracy of expenditure and EQC review procedures.

The FRC ordered that a full Root Cause Analysis (RCA) for each audit reviewed must be completed. It said this should help establish the reasons for poor audit quality and how quality might be restored.

The regulator said it will assess the firm’s local audit quality action plan and then determine whether any additional procedures or increased audit reviews will be required in the scope of its 2020/21 inspection programme for Grant Thornton.

A spokesperson from Grant Thornton said: “Grant Thornton are absolutely committed to audit quality and we welcome all areas of the review work performed by the FRC.

“We recognise that we need to make improvements and are investing to do so. We are mindful, when performing our work, that local auditors have wider roles and responsibilities to commercial auditors, and that users of the local authority and NHS financial statements, including citizens as taxpayers and users of public services, have different priorities from corporate shareholders. We strive to bring an appropriate balance to our responsibilities under the National Audit Office Code.

“We will continue to develop and improve our audit approach and provide appropriate training for the other areas identified by the FRC in this year’s inspections. We currently apply Root Cause analysis to all internal and external files that require significant improvement. We will ensure that we respond to any underlying issues in a systematic manner, through our Quality Investment Plan. We will also undertake a Root Cause review on all reviews.”

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