The latest edition of the Developments in Audit report sets out the FRC’s annual assessment of UK audit and ongoing expectations for how audit firms should deliver audit quality improvements to deliver a more effective audit market in the public interest.

The FRC has flagged two priority areas of concern, with professional scepticism and challenge of management the two key areas ‘where deficiencies continue and improvement still needs to be made’.

The most significant audit weaknesses identified in the 2020/21 inspection cycle related to inconsistency in audit quality across different firms, across different audits within the same firm, and even within different parts of the same audit; a lack of professional scepticism, including the failure to adopt an attitude to sufficiently challenge management’s assumptions; and the poor application of audit judgments or estimates related to going concern or impairments.