New research with Audit Committee Chairs published
Independent research commissioned by the Financial Reporting Council builds on similar research in 2020, reinforcing the case for developing standards for Audit Committees to help promote a more consistent approach to audit quality. The research, conducted by YouGov, is based on in-depth interviews with Audit Committee Chairs (ACCs) discussing how they carry out their role.
A range of different ACC views were expressed on audit quality, with some ACCs continuing to find it difficult to differentiate audit quality from the quality of service provided by their audit firm. In common with last year’s findings there were also relatively few indications of regular challenge by ACCs of audited companies’ senior management.
Nevertheless, the ACCs interviewed do take audit quality very seriously. and are particularly alert to quality during the auditor tendering process, with mandatory tendering being seen as an opportunity to encourage innovation by prospective auditors.
The research also found that auditors have adapted quickly to the challenges posed by the pandemic, with emerging signs that the move to remote working has been accompanied by a shift in the relationship between the ACC and the lead audit partner, such that it has become more formal, and interactions have become more structured.
Mark Babington, FRC’s Executive Director of Regulatory Standards, said:
“It is vital that audits of public interest entities are conducted to a high standard and Audit Committees and their chairs have a key role to play in ensuring this happens. Today’s research confirms that Audit Committee Chairs understand the importance of high-quality audit, and that this insight was used to good effect to deal with the heightened challenge and uncertainty caused by the pandemic. Nevertheless, some ACCs commented that it can be a challenge to differentiate audit quality from the quality of service provided by the auditor.”
“As the FRC transitions to ARGA we will take these findings into account as we develop the means of delivering high standards of audit, reporting and corporate governance.”
A link to the full research can be found here.
Published 3 February, 2022