In a scathing report the audit watchdog has said that significant improvement is required in the audits conducted by small firms. Some firms have even been blocked from taking on listed clients because of the poor quality audits.
The conclusions will come as a bitter blow to smaller firms hoping to compete with the dominance of the big firms and the expansion of audit competition.
A report from the Audit Inspection Unit of the Financial Reporting Council says today that a "high proportion" of audits need to improve especially in gathering evidence to support material balances reported in financial statements.
In stinging criticism the reports also says that where smaller firms are involved in the audit of multi national groups significant improvements are required in "most cases".
Apologies for extensive quote, but this is damning.
Can the accounting profession have any credibility if it can’t do one of its most basic tasks correctly?