The Independent Regulatory Board for Auditors (IRBA) has released its 2025 Public Inspections Report on Audit Quality, revealing that only 28% of inspected audit engagements met relevant standards, down from about 45% the previous year. The report highlights recurring weaknesses and calls for improved quality management in audit firms. Inspections focused on higher-risk cases, so findings do not represent the entire profession.
The IRBA's report notes an increase in incorrect audit opinions, fundamental ethical breaches, and cases lacking sufficient evidence to support opinions issued.
Common deficiencies include revenue recognition, journal entries, financial statement disclosures, going concern assessments, significant estimates and judgements, reliance on IT controls, weak documentation, and poor professional scepticism. Auditors often failed to challenge management robustly or document evidence adequately.
At the firm level, compliance showed modest improvement, with good outcomes rising from 23% to 30% among inspected firms. However, referrals for investigation increased from two to five firms. Some firms lacked effective quality management systems, engagement reviews, risk assessments, training, independence safeguards, and remediation processes.
The report addresses IT and AI challenges in audits, citing weak access controls, insufficient testing of system reports, and poor understanding of IT environments. IRBA states that while technology like AI can enhance audits, it cannot replace human judgement.
To address issues, IRBA recommends root cause analysis (improved to 67% in firms performing it), stronger leadership accountability, better training in areas like IT audits and financial reporting standards, tougher independence controls, and measurable remediation plans. The findings come amid past scandals such as VBS Mutual Bank and Steinhoff, underscoring audits' role in financial trust.
