The UK accounting watchdog has warned that action may have to be taken against BDO and Forvis Mazars as the quality of their audits remained below standards for the fourth year in a row.
In its annual review of the UK’s largest auditors, the Financial Reporting Council (FRC) praised a generally improved performance from the big four of Deloitte, EY, KPMG and PwC.
But the FRC said inspections found audits by BDO "declined significantly" from 69% to 38%, while those from Forvis Mazars dropped from 56% to 44%.
“Given their strategic importance to the audit market, both firms must urgently address the causes of these declines and undertake significant audit quality improvement plans which will be closely monitored by the FRC,” the regulator said.
The FRC said it will conduct "more intensive supervision" of the pair and "may take stronger action... if we do not see improvements in 2025".
Stronger action could include the regulator potentially banning firms from auditing listed companies, banks and insurers, which are known as public interest entities (PIEs).