FRC: High quality audit enhanced by stronger culture
10 May 2018
It is important that firms create a culture where achieving high quality audit is valued and rewarded, and which emphasises the importance of ‘doing the right thing’ in the public interest according to a new report by the FRC, ‘Audit Culture Thematic Review’.
The FRC considered how firms identify and pay attention to challenges in their culture and take action to address them to promote and sustain improvements in audit quality.
The report notes that firms are investing considerable time and effort on their firm-wide culture and identifies numerous examples of good practice among firms and highlights key areas that firms should address to enhance audit quality.
Key areas where firms should focus greater attention to establish, embed and promote an appropriate audit culture include:
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Giving additional prominence to audit specific behaviours and values within the firms’ cultural design, including the fundamental principles of integrity, objectivity, independence and professional scepticism that underpin high quality audit;
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Ensuring that all audit partners and staff appreciate that a good audit is of significant societal value and helps to underpin transparency and integrity in business;
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Balancing the firms’ robust processes to sanction poor quality work or behaviour with better recognition of positive contributions to high audit quality;
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Further developing the firms’ root cause analysis techniques to identify the behavioural or cultural factors that contributed to good and poor quality outcomes; and
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Improving the firms’ monitoring of how successful they are at embedding their desired culture, including the Independent Non Executives of the firms being more proactive when performing their assessment of the steps being taken by the firms to embed an appropriate culture.
The FRC encourages firms to provide more extensive and transparent public reporting on their culture to enhance engagement with stakeholders and to build confidence and trust.
Full press release
Full report
© FRC
