The Financial Reporting Council’s (FRC) latest Annual Review of Audit Quality contains some encouraging messages for the audit profession and its stakeholders. Audit quality remains strong, the number of audits requiring significant improvement has fallen, and progress is increasingly visible beyond the largest firms. The latest results certainly reflect well against those from just a few years ago.

For much of the past decade, the focus has been on raising standards. Regulators have increased scrutiny, while firms have invested heavily in quality initiatives. But it’s important to focus not just on how far audit quality has come; what comes next matters too. Further audit gains will depend on embedding quality across every engagement.

Consistency matters because it is what investors, businesses and the wider market depend upon. A few excellent audits cannot compensate for quality that might vary between firms, offices or engagement teams. Confidence in audit comes not from isolated examples of excellence, but from the expectation that a high-quality audit will be delivered every time. This consistency and confidence will also play a key role in driving competition in the sector.

Where does improvement still need to happen?

The first area is professional judgement. Despite years of regulatory focus, the FRC continues to identify findings in areas such as impairment assessments and revenue recognition. These are not straightforward compliance exercises: they require auditors to challenge assumptions, evaluate evidence and apply scepticism when management’s conclusions appear optimistic or unsupported. The persistence of findings suggests that while firms increasingly understand what good audit looks like, applying that level of challenge consistently remains difficult.

The second area is the gap between process and execution. Audit firms have invested considerable time and resources in strengthening their Systems of Quality Management. The FRC rightly emphasises their importance as the framework through which quality is monitored and governed. However, robust systems do not automatically guarantee strong audit outcomes. Policies, controls and monitoring processes only create value when they influence behaviour on individual audits. Audit quality is ultimately determined by the decisions made by people in real situations, often under time pressure.

The third challenge is achieving greater consistency across the wider market. The latest review shows encouraging progress among firms outside the largest audit networks, but a gap remains. Differences in investment, specialist expertise and quality management capabilities continue to influence outcomes. That should not be viewed as a criticism of smaller firms. Rather, it reflects the reality that sustainable quality requires infrastructure, leadership and resources.

How does the profession get there?

One answer lies in better planning. The FRC’s Root Cause Analysis highlights recurring issues around planning, over-reliance on previous-year approaches, unclear responsibilities and late involvement of specialists. These operational details can have a big impact on how effectively a technically proficient team can do its job. Quality problems rarely emerge overnight: more often, they begin with risks that were not identified early or challenged robustly enough.

A second priority is shifting the conversation from remediation to effectiveness. The profession has become increasingly sophisticated at identifying deficiencies and implementing corrective actions. Training programmes have been expanded, methodologies updated and controls introduced. Yet the real measure of success is not whether remediation occurred, but whether it worked in practice. Did quality improve? Did inspection findings reduce? Did behaviour change on live engagements? Future progress will depend on answering those questions convincingly.

The profession must also continue investing in people. Of course, artificial intelligence, advanced analytics and automation will play a growing role in audit. Used well, these technologies can improve consistency, increase coverage and help identify risks more effectively. Technology will not replace judgement though. The ability to challenge management, understand business realities and exercise professional scepticism remains fundamentally human.

Transparency can also be a powerful driver of improvement. Alongside its review, the FRC has published audit firm metrics to help users understand how firms manage and monitor quality. The FRC says these metrics are not intended to rank firms, and that their value lies in encouraging richer conversations about what drives quality and how it is sustained. For their part, firms have said they welcome greater clarity from the regulator about what it expects, and there were examples of this in this year’s report.

Where next?

The FRC’s 2026 review should be seen as a milestone rather than a destination. The reduction in significantly deficient audits is evidence that the profession’s efforts are having an impact. However, the next challenge may prove harder than the last.

Raising quality is one thing, making it routine and repeatable across every firm, team and engagement is another. Strong leadership, practical methodologies and teams that feel empowered to challenge will be key. That, more than any inspection score or performance metric, will determine the long-term confidence that stakeholders place in the audit market.

Dean Beale is executive director of the Centre for Public Interest Audit.