FRC publishes new research with Audit Chairs

Of interest to those working with Audit Committees

On 26th January, the Financial Reporting Council (FRC) published independent research conducted by You Gov and based on in-depth interviews with Audit Committee Chairs (ACCs) discussing how they carry out their role.

According to the FRC press release, the “reinforces the case for developing standards for Audit Committees to help promote a more consistent approach to audit quality.” It goes on to say that “Among the ACCs interviewed there were a range of different views expressed on audit quality. Some ACCs continue to find it difficult to differentiate audit quality from the quality of service provided by their audit firm. In common with last year’s findings there were also relatively few indications of regular challenge by ACCs of audited companies’ senior management.”

However, there are some positive signs in that “the ACCs interviewed take audit quality very seriously. They are particularly alert to quality during the auditor tendering process, with mandatory tendering being seen as an opportunity to encourage innovation by prospective auditors.”

This research is important in that it can be expected to guide the approach to regulation that the FRC takes as it transitions to ARGA and there is a clear emphasis on the need for audit committees to better understand the difference between audit quality and the quality of service provided by the auditor.

The full research paper (53 pages, but a useful read) can be found here.

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