FRC pushes for more sceptical auditors

Measures need to be put in place to improve professional scepticism when it comes to the auditing process.

This is according to the Financial Reporting Council (FRC), which was speaking after the publication of its Audit Quality Inspections Annual Report 2012-13. While improvements have been made on this issue, the body still thinks more can be done.

In order to return the most accurate auditing results possible, individuals working in the sector are always encouraged to have a questioning mind in order to spot any possible misstatements, which may be due to human error or fraud.

According to the FRC, it is important to recognise the great strides that have been made with regards to professional scepticism, but smaller audits in particular need to be overhauled.

Paul George, executive director conduct at the organisation, said: "Audit makes a vital contribution to investor confidence in financial statements. We are pleased to see in this year’s results that firms' efforts to address our concerns on professional scepticism are bearing fruit, particularly in the FTSE 350.

"It is important that further improvements are more uniformly and consistently achieved across all entities and by all firms."

The FRC report highlights include an improvement in the overall quality of audits - 59 per cent of those carried out on FTSE 350 firms were categorised as good or acceptable after being inspected.

Some 15 per cent of audits inspected were found to need significant improvement, which is up from the 2011-12 figure of ten per cent. This demonstrates how policies can still be overhauled in an effort to tighten up the whole process. Indeed, focusing on audit quality is the main recommendation to come out of the report.

The FRC is currently preparing for a change at its top table, as Baroness Hogg is stepping down as chair of the organisation after three years in the role. While her term ended in April, she has agreed to stay on until a suitable replacement is found.