FRC encourages firms to adopt early warning systems to improve audit quality

Article summary

The Financial Reporting Council (FRC) has stated that tools for flagging signs of poor-quality audits should be used more effectively so timely corrective action can be taken. The advice comes after the FRC conducted a major review into the use of early warning systems in auditing practices. The use of audit quality indicators (AQIs), it was found, plays an essential role in helping audit firms detect audits at risk of not meeting necessary standards and enabling audit committees to hold audit firms accountable. Though the FRC is encouraged by several firms utilising AQIs, they nevertheless expressed concern that the largest audit firms are monitoring AQIs after audits are completed, rather than before or during the process.