The 68-page report shows there were 15 cases where suspected misconduct in statutory audits was under investigation, as of 31 March 2016 (see below). Since then, investigations into PwC’s audit of BHS and KPMG’s audit pf HBOS have been announced. Investigations continue up to the point when a formal complaint is delivered to the Conduct Committee, when that decision is usually made public.

Last month, the FRC confirm it would investigate PwC’s audit of BHS. The high street chain collapsed in April 2016, just a year after it was sold to Retail Acquisitions Ltd (RAL) for £1. PwC representatives were questioned by the joint BIS and DWP committee of MPs about why the firm failed to raise any significant issues in the accounts, after they heard evidence that the sale was prompted by concerns to avoid a possible insolvency.

Meanwhile, KPMG’s audit of HBOS came after heavy criticism levelled at the FRC by MPs over its perceived failure to take action sooner to examine the Big Four firm’s role in the run up to the bank’s collapse in 2008.

During its investigation of KPMG, the FRC will look at two areas of enquiry. Firstly, the appropriateness of management’s use of the going concern assumption in the preparation of the financial statements for the year ended 31 December 2007; and secondly whether there were material uncertainties about the entity’s ability to continue as a going concern that needed to be disclosed in the financial statements.

The report also included the outcome of investigations pursued, showing the FRC had issued around £4.3m in fine and issued nine reprimands, three severe reprimands and excluded one lead audit partner for three years. Costs of around £1.6m were accrued.

The report also reveals the number of audits inspected in 2015/16 rose to 137 from 126 in 2014/15.

Of those, 89 Big Four audits were inspected, up from 78 the year before, with PwC receiving the most inspections with 25. Deloitte and KPMG both received 22 inspections, while EY saw 20.

Some 66 of the total inspections were of FTSE 350 audits, up from 54 in 2014/15.

FRC executive director for Audit Melanie McLaren said: “Our vision for audit is that it is trusted to provide reliable assurance on the public reporting of financial information, and in doing so, promotes good governance and facilitates the effective allocation of capital.

'The FRC's strategy is to promote continuous improvement in audit quality. One of the key factors in achieving this is to engage with other regulatory professional bodies, auditors, audit committees and investors to communicate good practice.'

The FRC’s State of the Nation report is available here.