In some audit cases, there was not enough evidence shown to support the conclusions of auditors, nor enough documentation to adequately explain complex information, ICAEW’s Professional Standards department found. Some firms did not consider enough whether circumstances could arise which would present a risk to audit quality.

ICAEW conducted reviews at 538 firms in the 15 months to March 2021, and considered 76% of audits to be satisfactory or generally acceptable.

The proportion of audits in the lowest category, where significant improvement is required, declined from 8% in 2019 to 7% in 2020/21, while 17% required improvement. This did not necessarily mean that the audit opinion was incorrect, or financial statements were misstated.

The audit monitoring report looks at non-PIE audits conducted by firms regulated for audit work by ICAEW over the past 15 months. As a Recognised Supervisory Body for audit, ICAEW monitors the work of firms of all sizes, from sole practitioners to the Big Four, and reports on its findings annually.

ICAEW conducts root cause analysis with firms to boost quality in cases where reviewers concluded audits needed to improve. The report includes case studies to help firms learn from this best practice.

“With 76% of audits satisfactory or generally acceptable, we’re pleased that quality remained consistent in a climate where auditors had to find new and innovative ways of working because of the pandemic,” Rama Krishnan, Chair of ICAEW’s Audit Registration Committee, said. “But there is still work to be done for audit quality to increase in some cases, and we want to see firms focus on professional scepticism and their use of documentation to drive improvement.”