On Friday, the FRC released its 2020 Annual Enforcement Review
(the Review), providing a summary of the FRC's enforcement work
over the past tax year. The FRC has identified those points on
which audit firms most frequently fall short, and the underlying
causes for such shortcomings.
While there are a number of these, the report's preface by
Executive Counsel Elizabeth Barrett singles out the failure to
exercise professional scepticism (ISA 200) as an ongoing issue that
continues to feature frequently. Auditors being too close to
management (with the concomitant risk to objectivity that this
creates) and insufficient escalation to and involvement of the
audit partner (as a result of which the significance of issues in
the context of the audit as a whole may be overlooked) are
highlighted by the Report as two of the main causes for this.
Another recurring theme that has featured frequently in FRC
investigations is failure to obtain sufficient appropriate
