The lowest overall scores, for a second year, were for questions on professional scepticism and the auditor’s response to regulatory oversight, with the FRC suggesting there is still some work for firms to do in this area.

On the plus side, there was evidence of improvement in all categories with the highest being that of independence and objectivity. 

However, a number of major audit investigations this year, including the Connaught Group case, has put the spotlight on audit quality.

AC chairs were asked eight questions on audit quality and were asked to rank their responses on a scale of one to seven, with one being the lowest and seven the highest. There was also an opportunity for ACCs to make comments against questions, which were the same as those asked last year in order to facilitate comparison.

The FRC says feedback on audit quality was ‘overwhelmingly positive’, with the majority giving their auditor a score of six or seven for most or all questions. Very few audit firms were given less than three on any question.

With stricter audit tender and rotation rules, listed companies are under more pressure to keep their auditors under review.

The research tried to gather evidence of reactions to new tender rules, although responses to this section were limited. The report stated that ‘a number of AC chairs who had changed auditor reported that a “fresh pair of eyes” and a new perspective had been beneficial; an AC chair whose company had retained the existing auditor noted that the tender had led to the firm “raising their game”’.

In the light of the increase in tendering activity, this year the survey also asked whether companies had been involved in a tender process during the previous twelve months. Of the total, 34 companies (17%) indicated that the company had conducted an audit tender, and of these 75% had resulted in a change of auditor.

The FRC says the responses also indicated some confusion as to the precise role of the FRC’s Audit Quality Review function, and the regulator says it will consider how it might better articulate this going forward.

Surveys were sent to all FTSE 350 AC chairs, plus a selection from listed companies outside of the FTSE 350 to provide a reasonably sized sample for the six largest audit firms. Response rates were up on last year, with just under 50% of recipients completing the survey and a total of 200 responses.

The  Audit Committee Chairs Survey 2015 is here

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