Internal Audit & Controls

The Financial Reporting Council has again found itself scrutinizing PwC's work on Babcock International, but this time the focus is on a different set of audits and a different engagement partner. The conclusion, however, is familiar. After a separate investigation into the company's statutory audits for the financial years ending March 31, 2019, and March 31, 2020, the UK audit regulator has imposed a £3.25 million financial penalty on the firm, concluding that the quality of the audits fell below the standard expected of statutory auditors.

The first time artificial intelligence changes an audit function, it probably won't be because an auditor is reviewing an AI governance framework. It will be because someone quietly asks a large language model to summarize a hundred-page policy, compare two years of control testing, identify unusual journal entries, or draft the first version of an audit report.

From July 1, the Financial Reporting Council revised Audit Enforcement Procedure is officially in force, replacing a framework that often left investigations following the same procedural track regardless of whether a case was straightforward, contested or somewhere in between. The changes do not expand the FRC's enforcement powers. They expand its options.

Auditor's reports have a habit of growing the way old rulebooks do. Every new requirement leaves its mark. Every reform adds another paragraph. Every perceived gap is filled with another disclaimer, another explanation, another carefully calibrated sentence until the document intended to illuminate a company's financial statements begins to obscure them instead. By the time investors reach the end, they often know they have read a great deal without feeling they have learned very much.

The UK's Financial Reporting Council has opened an investigation into the statutory audit conducted by PricewaterhouseCoopers of WH Smith's consolidated financial statements for the financial year ended August 31, 2024.

The Financial Reporting Council (FRC) announced sanctions against BDO and Jones over the 2019 statutory audit of NMCN. The regulator described the breaches as “significant and serious,” pointing to numerous and pervasive failures across the audit work, particularly in the testing of long-term contracts and the assessment of going concern risks.

The audit profession has spent years talking about becoming more strategic. Deloitte’s latest outlook suggests that conversation is finally starting to turn into something operational.