TOP TEN accountancy firm Baker Tilly has been told to review its audit methodology in light of continuing deficiencies in the quality of its audit work discovered as part of an inspection by the profession’s watchdog.
Baker Tilly was also criticised by the FRC for its reluctance to accept recommendations made by the regulator, which found half of the audits it inspected required significant improvements and that progress in improving the quality of its work has been slower than expected.
The FRC found that of the six Baker Tilly audits it reviewed as part of its Audit Quality Inspection Report, three audits required significant improvements; one required some improvement, while two were performed to a good standard.
“We are concerned that, despite additional correspondence with the firm on the issues arising, the firm may not have accepted certain of our findings that led us to conclude that significant improvements are required,” the FRC said.
According to the FRC, areas in need of improvement include the audit of impairments, the audit of IT controls, the consideration given to financial statement risk, the reporting of audit differences arising on the audit of the valuation of interest rate derivatives and the performance of substantive analytical review procedures.
As part of its findings the FRC told the firm to review its audit methodology in light of continued deficiencies in its analytical review process and to take more effective action in response to “internal and external audit quality monitoring findings”.
“The firm’s rate of progress in achieving improvements in audit quality, particularly in relation to substantive analytical review and the audit of IT systems, has been slower the we expected,” the FRC said.
In response to the findings Baker Tilly said: “We are committed to achieving the highest standards of audit quality and we continue to take whatever actions are necessary to do this.
“We welcome the Audit Quality Review Team’s report and we are already addressing all of the findings that will lead to an improvement in audit quality.”