Accountants BDO and Forvis Mazars Ordered to 'Urgently' Improve in Britain

 

LONDON, July 30 (Reuters) — On Tuesday, Britain's accounting watchdog revealed that its latest annual spot checks have uncovered a significant decline in audit quality at BDO and Forvis Mazars. The Financial Reporting Council (FRC) warned that these firms must "urgently address" the issues or risk being barred from auditing listed companies.

The FRC's annual review of audit quality among top accounting firms found that, overall, 74% of audits were rated as "good" or needing only minor improvements. However, BDO's performance plummeted from 69% to 38%, while Forvis Mazars' results fell from 56% to 44%.

"Disappointingly, BDO and Forvis Mazars’ performance has fallen significantly below our expectations," said Sarah Rapson, the FRC's executive director of supervision. "Both firms are strategically important to the UK audit market and the wider UK economy, so it is vital that they deliver on their agreed improvement plans. The FRC’s supervisory work with these two firms will continue to focus on these improvements."

The FRC warned that if BDO and Forvis Mazars do not improve by 2025, it "may take stronger action," including potentially using its "auditor registration" powers to remove their permission to audit listed companies.

Phil Verity, UK chief executive at Forvis Mazars, expressed disappointment with the results but noted that the company had launched a quality improvement plan in October 2023, which is expected to positively impact next year's report. "We are encouraged by the FRC’s acknowledgement that transforming audit quality takes time," Verity said.

BDO also expressed deep disappointment with its scores. "Comprehensive actions and plans, shared with our regulators, have been and are being implemented to address each of the areas identified," said BDO Managing Partner Paul Eagland.

The FRC noted that the "Big Four" audit firms—EY, KPMG, Deloitte, and PwC—continued their improving trend with scores of 76%, 89%, 94%, and 76% respectively.

Policymakers are hoping BDO and Forvis Mazars will provide more competition to challenge the Big Four's dominance. The newly elected Labour government has pledged to advance plans to transform the FRC into a more powerful Audit, Reporting, and Governance Authority to enhance auditing standards, following scandals involving companies like Carillion and BHS.