Over half (57%) of audits completed by Tier 2 and 3 auditors, which exclude the eight largest firms, needed ‘significant improvements’, up from only a third last year.

‘It is concerning that such a high proportion of audits were assessed in the poorest quality category,’ said the Financial Reporting Council (FRC) in its annual audit quality inspection reports of 27 audit firms, with problems particularly among Tier 3 firms.

Only three of the audits inspected were classified as ‘good or limited improvements’, compared to five last year. Back in 2020/22 six audits were given the top grading.

The FRC said there were recurring problems with the audit work, with improvements needed to a raft of basic audit skills, including estimates and judgments, journal entry testing, going concern, and revenue, and risk assessment.