Audit Thematic Reviews
Published: 23 February 2024
7 minute read
In our role as an improvement regulator, we conduct audit thematic reviews to look at firms’ policies and procedures in a specific area to make comparisons between firms, identify areas of common weakness and share good practice.
Thematic review reports
Thematic reviews supplement our annual programme of reviews of individual audits and firms. This work is now undertaken within Audit Market Supervision.
In a thematic review we look at firms’ policies and procedures in respect of a specific area or aspect of the audit or firm-wide procedures to make comparisons between firms with a view to identifying both good practice and areas of common weakness.
The reviews are deliberately narrow in scope, and are chosen to focus on an aspect of audit or firm-wide procedures in greater depth than is generally possible in our review of individual audits.
| Name | Thematic Review: ISQM (UK) 1 Root Cause Analysis (RCA) |
|---|---|
| Publication date | 12 September 2024 |
| Type | Thematic review |
| Notes | The FRC has performed an ISQM (UK) 1 thematic review of Root Cause Analysis (RCA) at the Tier 1 audit firms. This thematic review looks at how RCA is planned, performed, and monitored for findings from individual audit engagements and firmwide processes. This review is intended to provide insight for all audit firms, by sharing key observations and good practice identified in the work for the Tier 1 firms. We expect all audit firms to consider these insights proportionately in the context of their nature and circumstances. |
| Format | PDF, 15.1 MB |
| Name | Thematic Review: ISQM(UK)1 Network Resources and Service Providers |
| Publication date | 6 August 2024 |
| Type | Thematic review |
| Notes | The FRC has performed an ISQM (UK) 1 thematic review to look at how the Tier 1 audit firms identify, categorise and assess network resources and service providers. This review is intended to provide insight to all audit firms, by sharing the key concerns and good practice identified from our work at the Tier 1 firms. We expect all audit firms to consider these insights proportionately in the context of their nature and circumstances. |
| Format | PDF, 1.0 MB |
| Name | Thematic review: Hot Review Processes |
| Publication date | 25 January 2024 |
| Type | Thematic review |
| Notes | Hot reviews provide independent challenge, intervention, coaching and support to audit engagement teams, focusing on complex and judgemental areas of audits. |
| Format | PDF, 778.4 KB |
| Name | Thematic Review Audit Sampling |
| Publication date | 24 November 2023 |
| Type | Thematic review |
| Notes | The FRC has undertaken a thematic review of the audit sampling methodologies and guidance for audit sampling for the seven firms’ classified as Tier 1 in the 2022/23 inspection cycle. This was undertaken to understand the extent to which the firms use sampling, including the impact of advances in technology, and understand and assess the different sampling methodologies used by these firms, including the role each firm attributes to sampling in building up the body of audit evidence. |
| Format | PDF, 1.5 MB |
| Name | AQR Thematic Review - IFRS 9 Banking Audit Methodology and its Application |
| Publication date | 24 February 2023 |
| Type | Thematic review |
| Notes | The FRC has undertaken a thematic review of the Big 4 audit firms’ methodology and guidance around IFRS 9 - Financial Instruments and assessed the quality of individual audit teams’ application of these resources. |
| Format | PDF, 396.0 KB |
| Name | AQR Thematic Review - Use of Audit Quality Indicators - Early warning systems need to be enhanced to drive improvements in audit quality |
| Publication date | 6 May 2020 |
| Type | Thematic review |
| Notes | This thematic review seeks to provide an understanding of the AQIs being used by the large audit firms for internal audit quality management purposes, along with their systems of monitoring and reporting. This includes observing areas of good practice with the objective of promoting continuous improvement in audit quality. We also explore which publicly reported AQIs are important to stakeholders. Furthermore, we highlight areas of good practice we see in other countries that promote public reporting of AQIs and stakeholder engagement on this topic. |
| Format | PDF, 5.7 MB |
| Name | AQR Thematic Review - The use of Technology in the audit of financial statements |
| Publication date | 25 March 2020 |
| Type | Thematic review |
| Notes | Does the use of technology improve audit quality? In our 2017 review ‘The Use of Data Analytics in the Audit of Financial Statements’ we reported that while data analytics had the potential to improve audit quality, its use to generate audit evidence was limited in areas other than journal entry testing. Three years on and we have refreshed our research and analysis and expanded it to consider the audit firms’ use of emerging technology. |
| Format | PDF, 667.7 KB |
| Name | AQR Thematic Review - Transparency Reporting |
| Publication date | 25 September 2019 |
| Type | Thematic review |
| Notes | The objective of our review is to assess the effectiveness of Transparency Reporting by audit firms in the UK. The scope of this thematic review includes all firms that prepare Transparency Reports, with the primary focus on those that adopt the Audit Firm Governance Code. |
| Format | PDF, 1.8 MB |
| Name | Audit Quality Thematic Review: Other Information in the Annual Report |
| Publication date | 6 December 2018 |
| Type | Thematic review |
| Notes | The Other Information is all financial and non-financial information included in an entity’s Annual Report other than the financial statements and the audited parts of the Directors’ Remuneration Report. It includes items of significant importance to investors such as the Strategic Report and Directors’ Report. Our review focussed on those aspects of the Other Information where the auditor has specific reporting responsibilities. |
| Format | PDF, 418.6 KB |
| Name | Audit Culture Thematic Review |
| Publication date | 10 May 2018 |
| Type | Thematic review |
| Notes | This thematic review provides a ‘snap shot’ of the actions being taken, by the eight firms that have adopted the Audit Firm Governance Code, to establish, promote and embed a culture that is committed to delivering consistently high quality audits. The findings are drawn from a wide range of evidence including our analysis of documentation obtained from the firms; a series of interviews with the firms’ leadership, Independent Non-Executives, investors, and audit committee members; our survey of a sample of audit partners and staff; and a series of focus groups run on our behalf by an independent third party. |
| Format | PDF, 564.8 KB |
| Name | Audit Quality Thematic Review - Materiality |
| Publication date | 12 December 2017 |
| Type | Thematic review |
| Notes | Auditors, in reaching their opinion as to whether financial statements are true and fair, assess the risk and evidence of material misstatement and/or omission. Auditing standards define information to be material if its misstatement individually or in aggregate could influence the economic decisions of users. Materiality is thus assessed quantitatively and qualitatively. Today, the assessment of materiality drives the scope, nature and extent of the auditor’s work. The determination of quantitative and qualitative materiality affects audit quality. |
| Format | PDF, 1.2 MB |
| Name | Firms' audit quality control procedures and other audit quality initiatives |
| Publication date | 2 March 2017 |
| Type | Thematic review |
| Notes | This report is intended to provide an understanding of quality control policies and procedures in place at the largest audit firms, including highlighting both areas of good practice and areas where improvements can be made, with the objective of promoting continuous improvement in audit quality. |
| Format | PDF, 358.2 KB |
| Name | The Use of Data Analytics in the Audit of Financial Statements |
| Publication date | 30 January 2017 |
| Type | Thematic review |
| Notes | The use of data analytics in the audit of financial statements is increasing in the global audit market including in the UK market. The FRC’s overall objective in undertaking this review was to increase our understanding of the stage that audit firms have reached in developing their tools in this area and how frequently these are being used by audit teams. As this is a developing area our review has focused on what is working well so that good practice can be shared with the objective of promoting continuous improvement in audit quality. We will also use the information gained to inform the development of auditing standards and in continuing to develop our inspection staff’s knowledge and skills in this area. |
| Format | PDF, 347.5 KB |
| Name | Root Cause Analysis |
| Publication date | 16 September 2016 |
| Type | Thematic review |
| Notes | This report is intended to provide an understanding of the audit firms’ RCA procedures, including observing areas of good practice and how these procedures can be improved, with the objective of promoting continuous improvement in audit quality. |
| Format | PDF, 547.1 KB |
| Name | Engagement Quality Control Reviews |
| Publication date | 8 February 2016 |
| Type | Thematic review |
| Notes | This thematic review considers the work performed by the engagement quality control reviewer (EQCR) in the audit of financial statements. The EQCR is a suitably qualified person, with sufficient and appropriate experience and authority to independently and objectively evaluate the significant judgments the audit team made and the conclusions reached in formulating the auditor's report. When our inspections or the firm’s own monitoring identifies a failure by the audit team to address certain matters satisfactorily this often raises the question of the effectiveness of the EQCR’s role in preventing audit quality deficiencies. This report is intended to promote a better understanding of the role of the EQCR and how this can support and enhance confidence in audit. |
| Format | PDF, 332.0 KB |
| Name | Firms' audit quality monitoring |
| Publication date | 5 January 2016 |
| Type | Thematic review |
| Notes | This review considers the monitoring performed by nine audit firms over their quality control systems for audits of financial statements as required by International Standard on Quality Control (UK and Ireland) 1 and the UK Audit Regulations, including the monitoring performed for 50 audits. This report is intended to promote a better understanding of the firms’ quality control monitoring programmes and how these can improve justifiable confidence in audit. |
| Format | PDF, 920.1 KB |
| Name | The audit of loan loss provisions and related IT controls in banks and building societies |
| Publication date | 2 December 2014 |
| Type | Thematic review |
| Notes | The observations made in this report are based on our review of firms’ procedures and guidance and relevant aspects of the audits we selected. The thematic review identified areas for improvement which we believe are relevant to all audit firms of banks and building societies. |
| Format | PDF, 1.2 MB |
| Name | Fraud Risks and Laws and Regulations |
| Publication date | 23 January 2014 |
| Type | Thematic review |
| Notes | This report sets out the principal findings of the second thematic inspection review undertaken by the AQR team during 2013. The two themes for this review were the auditor’s identification of and response to fraud risks, and the auditor’s consideration of laws and regulations. This report should promote a better understanding of the role of auditors in these important areas and should also assist Audit Committees in discharging their oversight responsibilities. |
| Format | PDF, 405.2 KB |
| Name | Materiality |
| Publication date | 16 December 2013 |
| Type | Thematic review |
| Notes | The theme for this review was chosen because it is an area of particular interest to investors given its potential impact on the scope of an audit and the extent of the audit work performed. This is reflected in the recent revision of ISA (UK and Ireland) 700 that requires auditors to report how they applied the concept of materiality in performing the audit and how this affected the scope of their audit. A key objective was to promote an enhanced understanding by auditors, Audit Committees and investors of the judgments that need to be exercised in determining materiality levels and in applying them during the audit. |
| Format | PDF, 534.6 KB |
What Makes a Good Audit?
| Name | What Makes a Good Audit |
|---|---|
| Publication date | 15 November 2021 |
| Type | Report |
| Format | PDF, 3.0 MB |