Audit Quality Review

The Audit Quality Review (AQR) team monitors the quality of the audit work of those UK audit firms that audit Public Interest and certain other entities within Scope (large AIM). The overall objective of our work is to monitor and promote continuous improvements in audit quality in the UK.

All UK audit firms that undertake Public Interest and large AIM audits are subject to AQR inspections in respect of this audit work. The professional bodies have the responsibility for monitoring all other audit work. The frequency of AQR inspections varies with larger firms inspected annually while other firms are generally inspected once every three years. In certain cases the inspection cycle can be extended to six years.

Scope of Independent Inspections

Our reporting arrangements are among the most transparent of any audit regulator in the world and we believe that they contribute to achieving continuous improvements in the quality of UK auditing.

Each year we publish a number of Individual firm reports and thematic inspections reports, which summarise the results of our inspection activities. We also contribute to the FRC’s overall report on audit quality.

In selecting individual audits to inspect we take account of a number of factors including the assessed risk in relation to the entity and particular priority sectors we wish to focus on. In respect of the FTSE 350 the Competition and Markets Authority has recommended that we inspect audit engagements on average every five years, with each individual engagement inspected at least every seven years.

Our reviews of individual audits place emphasis on the appropriateness of key audit judgments made in reaching the audit opinion and the sufficiency and appropriateness of the audit evidence obtained. Our reviews of firm-wide procedures are wide-ranging in nature and include an assessment of how the culture within firms impacts on audit quality.