Adrian JohnsonTLDR:
- Grant Thornton has been demoted from the top tier of audit supervision due to a decrease in the number of high-profile clients
- The accountancy firm has faced several regulatory fines in recent years due to deficiencies in its audit work
Grant Thornton has reportedly been demoted from the top tier of audit supervision after the accountancy firm cut its number of high-profile clients, the Financial Times has reported. The demotion is seen as a setback for the firm, which has faced several regulatory fines in recent years due to deficiencies in its audit work. This move comes at a time when the Big Four accounting firms are under increased scrutiny and calls for reform in the audit industry are growing.
Grant Thornton has faced criticism for its controversial audits of high-profile companies such as Sports Direct and Patisserie Valerie. In 2019, the firm was fined £650,000 for its poor audit of the cake chain, which collapsed following a massive accounting fraud. The firm was also fined £3m in 2018 over its audit of another chain, BHS, which collapsed with a huge pension deficit.
The demotion from the top tier of audit supervision means that Grant Thornton will now be subject to more frequent inspections and will have to provide additional information to regulators. The move is seen as a way to increase oversight of the firm and ensure that it is carrying out its audits properly.
Grant Thornton is not the only accounting firm that has faced regulatory action in recent years. The Big Four accounting firms, Deloitte, EY, KPMG, and PwC, have all faced criticism over their audit work and have been the subject of regulatory investigations. Calls for reform of the audit industry have been growing, with some experts calling for the break-up of the Big Four and the introduction of greater competition.
Despite the criticism and regulatory action, the Big Four continue to dominate the audit market, with a market share of around 97%. Many argue that the concentration of power in the hands of a few large firms is a major factor contributing to the problems in the industry. They argue that greater competition would lead to higher-quality audits and improved accountability.
The Financial Reporting Council (FRC), the regulator responsible for overseeing the audit industry, is currently conducting a review of the sector. The review is expected to result in recommendations for reform, which could include measures to increase competition and improve the quality of audits.
In the meantime, the demotion of Grant Thornton from the top tier of audit supervision is seen as a warning sign for other accounting firms. It is a reminder that regulators are closely scrutinizing the industry and will take action against firms that fail to meet the required standards. The demotion also highlights the need for reform in the audit industry to ensure that audits are carried out properly and investors can have confidence in financial statements.
In conclusion, Grant Thornton’s demotion from the top tier of audit supervision is a significant development in the ongoing debate about the future of the audit industry. It highlights the need for reform and increased oversight to improve the quality of audits and restore confidence in the industry. The demotion serves as a warning to other accounting firms that they must take their responsibilities seriously and ensure that their audits meet the required standards.
