Grant Thornton axed from top flight of audit supervision after removing high-profile clients
Accountancy firm Grant Thornton has been cut from the industry watchdog’s top tier of audit supervision after removing a number of high-profile clients.
The Financial Reporting Council demoted the firm from “tier one” to “tier two” status last year, according to regulatory filings from July, which were first reported by the Financial Times today.
Firms in the lower tier are subject to inspections of their “public interest entity” (PIE) audits every three years, rather than annually.
Grant Thornton, the UK’s sixth-largest accountancy firm, removed more than 70 per cent of “public interest” clients between 2016 and 2022, including listed companies and insurers.
It audited 20 PIEs in 2022, while rival BDO had 217 PIE clients in the same period.
Grant Thornton has received several regulatory fines for audit failings in recent years, including £2.34m over collapsed café chain Patisserie Valerie.
Sarah Rapson, the FRC’s executive director for supervision, told the Financial Times that the firm’s demotion did not reflect audit quality but rather a “smaller share of the PIE market”. The regulator’s most recent audit quality report for Grant Thornton noted improvements.
Grant Thornton told the paper: “We are extremely proud of our quality results over the last three years and respect the regulator’s decision to include our firm in its ‘Tier 2’ category of supervision.
“The decision by the FRC has no impact on our audit strategy and our continual investment in audit quality.”
Big Four firms Deloitte, EY, KPMG and PwC, as well as plus BDO and Mazars remain the only “tier one” firms after Grant Thornton’s demotion.
Raising challenger firms’ share of PIEs is a major part of the government’s long-delayed promises to boost competition in the industry.
City PM contacted Grant Thornton for comment.