On 22 June 2022, the Financial Reporting Council (FRC) issued a consultation on publishing audit quality indicators (AQI) for the largest UK audit firms. The objective of this proposal is to provide users of audited information with greater detail on audit firms' attempts to deliver high quality audit.
Increasing confidence in the audit market is very much a current issue and the FRC are striving to enhance audit quality to help drive confidence. To that end, the FRC's objective to require the largest UK audit firms to publish AQIs are to:
- Set high standards in corporate governance and stewardship, corporate reporting, auditing, and actuarial work and assess the effectiveness of the application of those standards, enforcing them proportionately where it is in the public interest.
- Promote improvements and innovation in the areas for which the FRC are responsible, exploring good practice with a wide range of stakeholders.
- Create a more resilient audit market through greater competition and choice.
AQIs are quantitative and qualitative measures of external audit quality which include input, output and outcome measures. They provide an indicator of an audit firm's ability to perform quality audits as well as providing insights into audit quality when read with other AQIs and relevant context.
There are currently three types of AQI which can be identified:
- Engagement level AQIs: These are shared confidentially between firms and specific audited entities.
- Management AQIs: These are KPIs which are internal to the audit firm.
- Firm-level AQIs: These are publicly reported.
The consultation on AQIs is open for comment until 18 August 2022. Ideally responses should be sent by email to AQIs-consultation@frc.org.uk. Written responses can be sent via post to:
Shamima Hussain
Financial Reporting Council
8th Floor
125 London Wall
London
ES2Y 5AS
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