The annual audit quality inspectors said that the two Tier 1 audit firms must take ‘urgent and decisive action to increase their standards on delivering high quality audits’.

While audit performance by the Big Four auditors improved markedly in the last 12 months, the Financial Reporting Council (FRC) pointed to a widening gap between the quality of audit at the Big Four firms and the inspected Tier 1 firms, BDO and Forvis Mazars.

The annual audit quality inspection (AQI) results for BDO declined significantly from 69% to 38% year on year for the 13 audits inspected, while Forvis Mazars’ results dropped from 56% to 44% for nine audits.

This meant that for BDO only just over a third of inspected audits were categorised as good or requiring limited improvements.