SME Audits Need to Improve Part 1

SME Audits Need to Improve Part 1

Nearly a third of UK audits completed by small and mid-tier firms need ‘significant improvements’ after inspections by the Financial Reporting Council (FRC). The inspections were carried out for the year ended 31 March 2023 on 32 firms in total and reported by the Financial Reporting Council in late 2023.

These inspection results will be influential for Irish regulators like the Chartered Accountants Ireland, the CPA Ireland, the ACCA as well as the Irish Audit & Accounting Supervisory Authority when carrying out their inspections of Irish audit firms in 2024.

The Financial Reporting Council say that ‘disappointingly, many of our findings were in routine areas, such as

  • the audit of journal entries;
  • complying with archiving requirements;
  • the audit of judgments and estimates (17% worse than in the previous report), and
  • the audit of going concern.

Audit teams need to demonstrate a greater effort at robust professional scepticism when it comes to both the audit of judgments and estimates, and going concern.

The FRC also suggested audit teams refer to the FRC paper, What Makes a Good Audit.

We will continue with Part Two of this blog next week.

Please also go to our website www.jmcc.ie/training to see our latest:

  • Latest updated AML for Accountants webinar (December 2023) which explains the current legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox. A 20% discount is available for orders of five or more webinars/products, if bought together.
  • There are other accounting/audit webinars on the site and more will follow throughout 2024.
  • Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
  • letters of engagement and similar templates. Please visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
  • ISQM TOOLKIT – We can also tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. The ISQM TOOLKIT 2022 is available to purchase here.
SME Audits Need to Improve Part 2

SME Audits Need to Improve Part 2

In last week’s blog ‘SME Audits Need to Improvewe highlighted a recent report by the Financial Reporting Council (FRC) in the UK about their audit inspection findings for the year ended 31 March 2023. We continue with extracts from the report below.

Going concern was described as ‘an area of particular concern to audit firms’ by the FRC and it resulted in worse findings by 1% compared to the previous review.

Key findings of the review were:

  • going concern included insufficient procedures to test cash flow forecasts;
  • inadequate procedures to elevate the impact of loan covenants;
  • insufficient procedures to assess the financing of debt; and
  • There were ‘shortcomings in the reviews of audit work performed by engagement partners and/or engagement quality control reviewer’.

Other areas that led to such a high number of audits needing significant

 improvement were:

  • Revenue accuracy; and
  • material accounting errors during an

Improvements recommended by the Financial Reporting Council include investment in:

  • audit methodology;
  • human resources,
  • audit quality functions; and
  • learning from mistakes made throughout their current auditing processes.

The FRC also suggested audit teams refer to the FRC paper, What Makes a Good Audit. See how to do this here.

Please also go to our website www.jmcc.ie/training to see our latest:

  • Latest updated AML for Accountants webinar (December 2023) which explains the current legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox. A 20% discount is available for orders of five or more webinars/products, if bought together.
  • There are other accounting/audit webinars on the site and more will follow throughout 2024.
  • Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
  • letters of engagement and similar templates. Please visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
  • ISQM TOOLKIT – We can also tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. The ISQM TOOLKIT 2022 is available to purchase here.