“PROMPT ACTION” must be taken by KPMG to review and revise its audit guidance on materiality, after the FRC raised concerns about the firm’s lack of progress in addressing previous failings.
In its annual review of the firm’s audit work, which found that 75% of the 20 audits it inspected were performed to a good standard, the FRC raised concerns “about the rate of progress in addressing our prior year findings relating to materiality”.
The FRC raised concerns on six audits in respect of the materiality levels set. In three of those audits, the overall materiality levels set were “inappropriately high”, it said.
On two further audits, materiality for work at component level had been set at the same level as overall materiality for the group financial statements, contrary to auditing standards while in another audit it was “unclear why materiality had not been reduced at the completion stage, given that reported profits were lower than forecast,” the report stated.
KPMG said it is “fully committed to continuous improvement in audit quality and independence processes and invest significant time and resources in developing and implementing our response to internal and external inspection findings”.