Regulator slams BDO and Mazars over poor audit performance
BDO and Forvis Mazars have been flagged by the regulator for troubling audit performances.
The Financial Reporting Council’s (FRC) Annual Review of Audit Quality revealed that audit results for BDO have declined significantly from 69% to 38% year on year, while Forvis Mazars’ results also declined from 56% to 44%.
The FRC warned that these results “do not meet expectations” and given the “strategic importance” both firms have to the audit market, they must “urgently address the causes of these declines and undertake significant audit quality improvement plans” that will be closely monitored.
It does recognise that improvements to audit quality can take time and will monitor and challenge firms through its “holistic supervisory approach”.
Phil Verity, UK CEO at Forvis Mazars said that files inspected by the FRC in this cycle did not benefit from the firm’s audit quality transformation plan launched last October. It anticipates that an improved performance will be shown in the July 2025 report.
Paul Eagland, Managing Partner at BDO, said the was is “deeply disappointed” with its results, especially after it had improved last year.
The gap between the performance in audit quality for BDO and Forvis Mazars, and that of their peers in Tier 1 has widened significantly.
Deloitte boosted its audit inspection figure from 82% to 94% and KPMG was also up from 74% to 89%. EY dropped slightly from 80% to 76% and PwC dropped 82% to 76%.
Of the audits inspected this year, 74% were categorised as good or requiring limited improvements. Audit quality for the FTSE 350 has also improved, up from 81% to 87% year on year, and the FRC says it is “pleased that audit quality in the UK for the largest listed businesses compares favourably internationally”.
The FRC’s executive director of supervision, Sarah Rapson, said: “The FRC welcomes the audit quality improvement at the largest four audit firms, particularly the improvement in FTSE 350 audits, which are some of the most complex and systematically important UK audits. This progress demonstrates the considerable efforts to improve audit quality firms have made over a number of years.
“Disappointingly, BDO and Forvis Mazars’ performance has fallen significantly below our expectations. 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.”
Phil Verity, UK CEO at Forvis Mazars said: “We are disappointed with this year’s results and recognise that we have not consistently met the desired levels of audit quality. We are encouraged by the FRC’s acknowledgement that transforming audit quality takes time. Forvis Mazars continues to take positive actions in relation to improving audit quality and strengthening the firm-wide systems and audit quality functions.
“Forvis Mazars is dedicated to quality; it is central to our values and strategy. We will continue to invest in, and focus on, applying the highest quality standards in our work, so that we can play our full part in the UK PIE Audit market”.
Paul Eagland, Managing Partner at BDO, said:“We are deeply disappointed with our grades this year, particularly when we had recorded an improvement last year. While we remain confident in the expertise and commitment of our people, it is evident that further work is necessary for us to be able to secure grades in line with the FRC’s requirements as well as our own internal standards.
“Comprehensive actions and plans, shared with our regulators, have been and are being implemented to address each of the areas identified.”
