The auditor that oversaw Patisserie Valerie during its period of financial irregularity will face tougher supervision from regulators after an annual review found the firm had failed to achieve quality targets.
A damning report from the Financial Reporting Council (FRC) found that none of the UK’s top auditors had reached the 90% quality targets required – and accused accountants of failing to challenge information supplied to them by clients.
Among those highlighted were PricewaterhouseCooper, KPMG, Deloitte and Grant Thornton – the auditor who had monitored the accounts of Patisserie Valerie during a period of alleged “significant, and potentially fraudulent, accounting irregularities” that led to the breakdown of the operator.
The hospitality firm was one of many companies to have their audits scrutinised by the FRC, as well as foodservice operator Mitie Group, which was audited by BPO. The FRC found that 75% of audits of FTSE 350 firms considered were found to be good or requiring limited improvement – beneath the overall target of 90%.
That number fell to 50% at Grant Thornton, while 26% of the firm’s audits in the past five years were found to have required significant improvements. The firm must now produce and comply with a new audit quality improvement plan and increase the number of audits to be inspected in 2019-20.
KPMG, which is already under closer scrutiny, was found to have improved over the latest period – however the business will remain subject to the FRC’s increased observation.
Chief executive of the FRC Stephen Haddrill said: “At a time when the future of the audit sector is under the microscope, the latest audit quality results are not acceptable. Audit firms must identify the causes of their audit shortcomings and take rapid and appropriate action to improve quality. Our latest results suggest that they have failed to achieve this in recent years.”