FRC highlights role of Engagement Quality Control Reviewer in overall audit quality
News types: Publications
Published: 8 February 2016
07/16
Today the Financial Reporting Council issues a thematic review undertaken by its Audit Quality Review (“AQR”) team on the work performed by engagement quality control reviewers (“EQCR”) in the audit of financial statements (PDF).
One of the FRC’s concerns is that firms’ do not maintain a consistently high standard of auditing. Whilst excellent work is performed by many, some in the same firm fall short of expectations. The engagement quality control (“EQC”) review process should ensure consistently high quality. Often it does improve quality but we also found evidence in some audits where weaknesses were not identified by the review. Firms can do more to evaluate the effectiveness of the EQC review and implement additional procedures, where appropriate, to reduce the occurrence of audit weaknesses that are not identified.
Paul George, Executive Director, Conduct Division, commented that,
“The EQCR plays an important role in the quality control process on an audit and is key to safeguarding audit quality. It is imperative that firms’ do more to evaluate the effectiveness of the EQC review and for firms to require EQCRs to obtain formal feedback on their performance.
Notes to editors:
Today the Financial Reporting Council issues a thematic review undertaken by its Audit Quality Review (“AQR”) team on the work performed by engagement quality control reviewers (“EQCR”) in the audit of financial statements (PDF).
One of the FRC’s concerns is that firms’ do not maintain a consistently high standard of auditing. Whilst excellent work is performed by many, some in the same firm fall short of expectations. The engagement quality control (“EQC”) review process should ensure consistently high quality. Often it does improve quality but we also found evidence in some audits where weaknesses were not identified by the review. Firms can do more to evaluate the effectiveness of the EQC review and implement additional procedures, where appropriate, to reduce the occurrence of audit weaknesses that are not identified.
Paul George, Executive Director, Conduct Division, commented that,
“The EQCR plays an important role in the quality control process on an audit and is key to safeguarding audit quality. It is imperative that firms’ do more to evaluate the effectiveness of the EQC review and for firms to require EQCRs to obtain formal feedback on their performance.
Notes to editors:
- The FRC is responsible for promoting high quality corporate governance and reporting to foster investment. We set the UK Corporate Governance and Stewardship Codes as well as UK standards for accounting, auditing and actuarial work. We represent UK interests in international standard-setting. We also monitor and take action to promote the quality of corporate reporting and auditing. We operate independent disciplinary arrangements for accountants and actuaries; and oversee the regulatory activities of the accountancy and actuarial professional bodies.
- 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.