In this year’s audit quality inspection reports, the Financial Reporting Council (FRC) flagged a number of areas of concern, stating that Deloitte auditors needed to improve the evaluation and challenge of management’s key assumptions of impairment assessments of goodwill and other assets
The FRC inspection team reviewed 194 individual audits this year across seven firms and at Deloitte assessed 15 (79%) as requiring no more than limited improvements. Of the 11 FTSE 350 audits reviewed, eight (73%) achieved this standard.
The watchdog flagged a number of areas where improvements were required, including improving the evaluation and challenge of management’s key assumptions of impairment assessments of goodwill and other assets, enhancing the consistency of group audit teams’ oversight of component audit teams, and strengthen the effectiveness and consistency of the testing of revenue.
The firm has taken steps to address the key findings in the 2019/20 inspection report, with actions that included increasing the extent of consultations, and enhanced learning, coaching and support programmes. The FRC identified improvements, for example, in the extent of challenge of management by audit teams in respect of the estimates used for model testing.
