The FRC has also broken a number of its own records for fines for misconduct or failings in the past year, including the £6.5m fine for PwC relating to the BHS audit and a £3.2m fine KPMG for failings in the audit of insurance firm Quindell.

Following government recommendations, the FRC recently announced plans to increase fines to £10m or more for misconduct by the largest audit firms from June this year. As a result, calls by some MPs to split up the largest audit firms could be somewhat premature, Thomson Reuters claimed.

If the FRC continues to impose these larger fines, there may start to be a change in culture in audit without the need for more radical action – similar to the change in the financial services sector after the Financial Conduct Authority started to fine heavily for misconduct.

Brian Peccarelli, chief operating officer, customer markets, Thomson Reuters said: ‘Some commentators had criticised the FRC for levying relatively small penalties that had no deterrent power. But now, the FRC is now starting to issue fines that can really sting audit firms.

‘Audit firms are making substantial investments in technology such as big data and machine learning to perform more robust audits. They are able use automation to extract and examine larger amounts of financial data from the business being audited which can then be reviewed for anomalies. ‘This allows audit firms to move away from just testing a small sample of the company’s revenue transactions, thus improving the audit process, making it more transparent with greater controls.’

Further reading

Sanctions and ethics: is the audit regulator fit for purpose?

Report by Pat Sweet