In the latest audit quality inspection reports, the Financial Reporting Council (FRC) has raised concerns about the level of management challenge at EY, but recognised that the audit firm had improved its overall audit quality
The FRC reviewed 19 individual audits this year at EY and assessed 15 (79%) as requiring no more than limited improvements. Of the 12 FTSE 350 audits reviewed, nine (75%) achieved this standard. None of the firm’s audits required significant improvements.
The firm has taken steps to address the key findings in the FRC’s 2019/20 public report, with actions that included enhancing the extent of professional scepticism, as well as ensuring the appropriate identification and assessment of contradictory audit evidence.
The main recurring finding in these results was the need to enhance the evaluation or challenge of aspects of management’s impairment and going concern assessments, with new key findings in relation to the audit of going concern assessments, expected credit loss allowances and deferred tax assets. Over the inspection period, EY strengthened the audit of going concern by introducing enhanced procedures since the impact of Covid-19.
