The 2023 Audit Forecast: Impending Reforms, Quality Crisis, And an Opportunity That Waits to Be Seized

The UK audit industry has been under tremendous scrutiny over the past few years. After suffering a series of scandalous failures, the industry was briefly looked upon as a market headed for doom.

Even as we enter the new financial year, the audit industry faces unprecedented uncertainty. This ambiguity is further catalysed by the ongoing economic impact of the pandemic, changes to audit regulations, growing public scrutiny, and the seemingly never-ending Big Four dominance.

However, with these challenges come significant opportunities for accounting firms to step up and provide high-quality audit services to clients in need. The UK government is continually making efforts to introduce reforms within the industry and bring a strong regulator into action to control audit quality. Thus, the new financial year looks promising for budding auditing firms.

In 2022, the FRC introduced the rule of joint audits, making it mandatory for firms to delegate at least a part of their audit to a smaller firm alongside a Big Four auditor. This opened a plethora of opportunities for small and medium-sized accountancy firms seeking to set foot in the audit world. With the industry set to undergo a revolution, the demand for audit support and preparation services is also seeing an upward trend.

In this post, we’ll explore the industry’s current state, the challenges facing firms, and the key opportunities that lie ahead in the new financial year.

Current Developments in the Audit World

Although several reforms have been introduced to revive the audit industry, the developments remain partially fulfilled and stagnated. One such development is the transition of authority from the Financial Reporting Council (FRC) to the Audit Regulation and Governance Authority (ARGA). Although the plan for the new regulator was originally proposed in 2019, the actual transition is now slated to take place in April 2024.

Notwithstanding the delay, the FRC has revealed its plan to re-prioritise changes with its existing non-legislative powers. One of these changes is the creation of a Minimum Standard for Audit Committees, the draft for which was proposed in November 2022. The FRC has also asserted that it expects FTSE 350 companies to voluntarily bring themselves in line with the standard instead of waiting until the formation of the ARGA.

Capitalising on the growing opportunities in the industry, several small and medium-sized accountancy practices are set to enter the audit world. Despite the skills gap and capacity crunch facing firms, the industry is expected to see a boom in FY 2023-24 with the support of professional audit support services.

The 2023-24 Audit Forecast: Trends to Look Out For

Audit Reforms

Against a volatile economic backdrop orchestrated by the recession, 2023-24 will be a critical year for the accounting and auditing landscape. Although the proposed reforms are moving forward at a relaxed pace, the new financial year may see the FRC introduce new regulations to control the quality of external audits and encourage midsized firms to take part in the accounting audit process.

Another potential change to look out for will be the FRC’s implementation of its additional supervisory powers through the new PIE Auditor Registration regime before the ARGA is brought into force.

Increased Competition

The competition in the accounting and auditing sector is rising rapidly despite the multiple controversies and slow pace of reforms. Regardless of the past scandals, the Big Four continue to dominate the audit market – in 2021, they collectively earned 98% of the FTSE 350 audit fees in the UK.

Further, the FRC’s proposition of joint audits positioned a competitive spirit among challenger firms. Small and midsized practices stepping into the industry now face competition not only from the Big 4 companies but from other market players. The competition was a deliberate push by the FRC to drive higher-quality audits in the country.

Thus, quality and effectiveness will be key for audit companies to sustain competition in the new financial year. This is one of the reasons professional accounting audit support is actively sought within the industry.

ESG Reporting

Building on its work in 2022, the FRC’s focus on Environmental, Social, and Governance (ESG) reporting will likely continue in the new financial year. Climate change, environmental awareness, and sustainability are largely discussed in today’s corporate world. ESG reporting sheds light on a company’s environmental, social, and corporate governance activities, a crucial requisite proposed by the FRC.

The pandemic stirred an active conversation about environmental changes and their impact on business. Therefore, monitoring whether additional ESG-related auditor guidance will be issued to firms in the new financial year will be crucial.

Professional Scepticism

Professional scepticism is at the heart of an audit. Following the massive audit failures of the past, it has become a heavily debated topic within and outside the accountancy profession.

In modern times, accountancy practices look for futuristic auditors with an advanced skillset, and professional scepticism is an integral part of it. This has further escalated the skills gap, which can be bridged with professional audit support services.

In the new financial year, audit firms are expected to put professional scepticism in the spotlight when hiring resources for their teams. In addition, firms may also focus on training auditors to negate cognitive bias, which can substantially influence their decisions.

Battling the Quality Crisis in the Audit World

The accounting and auditing industries are already faced with a massive skills gap. Per the latest statistics, almost half (49%) of UK accountancy firms have reported being significantly affected by the shortage of skills and resources. This crunch is a substantial contributor to the quality crisis in the industry.

In order to ensure high-quality audits, it is essential that firms employ and train auditors for futuristic skills. However, this can be a time- and cost-intensive task. This is where audit support and preparation services come into the picture.

Top accounting audit support providers open a vast talent pool for UK firms beyond geographical boundaries. Companies can, thus, hire highly qualified, trained, and experienced resources from any part of the world. These resources work dedicatedly on clients’ projects and their preferred software. They function as an extension of their in-house teams and help enhance the quality and productivity of audits.

Outsourced audit support professionals are certified and trained in UK audits with practical experience in the industry. They possess the essential skills of the modern auditor, which help minimise audit errors, detect fraud, and enhance quality.

Looking for Professional Audit Support Services in the UK?

The audit industry is buzzing with opportunities for growing firms in the new financial year. If you are looking to seize this opportunity and set foot in the industry, you may need professional support from experts.

QXAS is a leading accounting audit support provider for progressive auditing firms in the UK. We have a dedicated team of highly skilled auditors ready to work with you immediately. Here’s how your firm can benefit from partnering with us.

• 150+ highly skilled, qualified, and experienced auditors
• Lightning-fast turnaround time
• 100% data security with GDPR compliance
• End-to-end management of resources
• Flexible engagement models

To hire talented audit support professionals for your team, speak to our outsourcing expert today – call us at +44 208-146-0808 or email us at [email protected].