Concerns over the quality of audit evidence for some of Grant Thornton's audit judgments and the conclusions it reached have been raised by the Financial Reporting Council's Audit Inspection Unit. In its 2009 public report released today, the AIU said it 'had particular concerns about the quality of evidencing the audit work in three audits'. The audit files, it said, 'did not contain sufficient appropriate audit evidence or record the audit team's reasoning in support of certain audit judgments made and the conclusions reached'. Instead, the AIU said for all three audits it had to rely to a large extent on the firm's audit team's oral explanations. It called for more justification for the sizes of certain samples selected for testing, the details and methods of which were not included in the audit file of three audits. 'In our view, such justification is necessary in order to ensure that the auditor obtains sufficient and appropriate audit evidence,' the AIU said. The mid-tier firm was also pulled up over its 2007 National Audit Review reports, where it did 'not make clear what specific action was taken in cases where audit files were graded "poor"'. As with last year, the AIU said Grant Thornton needed to complete its appraisals of staff on a 'timely basis', but acknowledged that senior management had recognised the need for action. On the subject of auditor rotation, the report says the firm should reconsider its policy 'in the light of the principles underlying the ethical standards'. Periods of involvement with an audit client at different levels of seniority are not aggregated for the purpose of assessing threats arising from long association with clients and the need to apply safeguards. Following the AIU's report last year, the firm has decided to 'enhance its partner rotation requirements' on the audits of unlisted public interest entities. Overall, the report found that Grant Thornton does have 'appropriate policies and procedures in place for its size and the nature of its client base'. 'In our view, audit procedures were generally performed to a good or acceptable standard,' the AIU said. The firm had action plans to address any outstanding findings from last year's report, it added. In its response to the report, Grant Thornton said: 'We are very pleased that the report concludes that the firm has policies and procedures in place in all areas reviewed that are appropriate for the firm's size and the nature of the firm's client base.' 'We recognise that maintaining audit quality in a challenging business environment requires continuous review of audit processes and the way in which they are applied in practice.' Commenting on the report today, Grant Thornton CEO Scott Barnes said: 'We invest much time and effort in maintaining and improving the quality of our work in all areas. This latest report confirms my belief that Grant Thornton's audit teams are among the best in the profession.'