The Financial Report Council (FRC) found significant weaknesses in the audit of expected credit losses, valuation of financial instruments, settlement and clearing accounts of banking audits conducted by KPMG.

The watchdog said KPMG needed to ‘urgently and comprehensively address the continuing deficiencies in the quality of audit work on banks and similar entities’.

Nearly half of the audits inspected by FRC needed improvement or significant improvement with nine out of 22 audits flagged as sub standard with eight requiring improvement. One audit required significant improvements, which is the first time this rating has been issued to KPMG since 2017/18.