Proposals

A humane standard of inspection

We are not calling for less oversight. We are calling for oversight that measures the quality of the audit rather than the volume of the file, that talks before it judges, and that holds itself to the same requirements it sets for those it inspects. Below are ten changes in four areas. Most of them already work in other European countries, and some were put forward by auditors themselves in our research.

Why “humane”?

An inspection does not assess paper, but the work of a person: their knowledge, experience and decisions made in specific circumstances. A humane standard of inspection is one in which the inspected auditor knows the measure by which they are assessed, can be heard before the assessment is made, and is not left alone for years with an allegation that may not be confirmed. This is not leniency. It is a condition for inspection to improve audit quality at all.

I. A fair measure

1. Full transparency of the rating scale

The criteria for each grade of the audit-file rating scale (1–4) should be public and known to those inspected in advance, as should the aggregate rating results.

Why
In 2025, deficiencies were found in the files of 266 of 271 inspected audits, and in 2024 in all 272. If findings appear in almost every inspection, the rating is decided by the criteria used to weigh them. An inspected auditor who does not know these criteria does not know what to improve, and the profession cannot check whether ratings are consistent.
Model
The UK Financial Reporting Council rates inspected audits on a four-grade scale. It publishes a description of each grade, from “good” to “significant improvements required”, together with aggregate results.

2. A measure for firm-wide procedures too — separating formal shortcomings from substantive ones

Findings on a firm’s procedures and its system of quality management should be weighed against public criteria. These criteria should distinguish shortcomings in the documentation of procedures from defects that genuinely affect audit quality. A gap in quality-management documentation and a wrong opinion on financial statements are not of the same weight and should not lead to the same consequences.

Why
Audit files are rated on a scale from 1 to 4, while a firm’s procedures have no measure other than a list of alleged breaches. Yet procedures make up a growing share of inspection findings: from 28.7% in 2022 to 60.7% in 2025. Without a measure it is impossible to tell which of these findings matter for audit quality and which concern documentation only.

3. Protecting professional judgement from being replaced by the inspector’s judgement

The inspection checks whether the auditor applied professional judgement, documented it adequately and stayed within the limits set by the standard. A different view taken by the inspector within those limits is not a breach.

Why
ISA 200 requires professional judgement throughout the audit, and ISA 330 and ISA 500 leave the nature, timing and extent of procedures to the auditor in line with the assessed risk. Using a discretion granted by a standard cannot be a breach of that same standard.

II. A fair procedure

4. Dialogue during the inspection

Preliminary inspection findings are given to the inspected auditor in writing and discussed with them before the report is drawn up. The auditor gets real time for explanations, matched to the number and weight of the questions, not a few hours for dozens of questions.

Why
Regulation (EU) No 537/2014 requires inspection findings and conclusions to be discussed with the inspected party before the inspection report is finalised (Article 26(8)). In practice, the inspected auditor often receives dozens of questions with a deadline counted in hours. Explanations given this way cannot be thorough, and the auditor learns of some allegations only from the report.

5. Genuine consideration of objections

The response to objections states which explanations and evidence were accepted, which were rejected and why. The assessment covers the whole audit documentation, not a selected part of it.

Why
The duty to consider the material comprehensively and to give reasons binds the oversight body just as the duty to document binds the auditor.

6. An independent expert or subject-matter mediator

In a dispute over how a standard should be interpreted, the parties can turn to an independent expert opinion or to mediation while the inspection is still under way.

Why
This proposal comes from auditors themselves. Disputes over professional judgement are technical disputes and are best settled by experts before they turn into administrative, disciplinary or court proceedings. If the body that makes an allegation also decides on its merits and rejects requests for an outside opinion, the inspected auditor has no way to have it independently verified.

7. Predictable time limits for proceedings

A set maximum duration for proceedings and published statistics on how long they actually take.

Why
About 318 disciplinary proceedings are pending, an average case takes about 3–4 years, and in 2025 40.5% of closed cases were discontinued. Waiting years for a decision acts as a sanction in itself, also for those whose case is eventually discontinued.

III. A proportionate response

8. Recommendation first, sanction second

Recommendations with a deadline, a remediation plan and verification of improvement come before a sanction. The authority turns to a sanction when recommendations have not been implemented or when the breach is serious.

Why
In 2021–2025, Poland accounted for 53% to 79% of all findings issued in the EU and EEA that an audit report does not meet requirements. Two thirds of Polish sanctions are reprimands and exactly such findings.
Model
Directive 2006/43/EC and Regulation (EU) No 537/2014 provide that an inspection results in recommendations which the audit firm implements within a reasonable time. Many EU countries make wide use of supervisory measures below the threshold of a formal sanction.

9. Competitive neutrality of assessors

Anyone who assesses audits carried out by other audit firms, including as an external expert, should not at the same time compete with them for the same clients.

Why
EU law requires inspectors to be independent of those they inspect and free of conflicts of interest. Competing in the market with the inspected firm is one source of such conflict.

IV. The person in the inspection

10. A survey after each inspection and care for the wellbeing of those inspected

After each inspection the inspected auditor completes an anonymous survey on how it went, and the aggregate results are published every year. The auditor is also told where to look for support.

Why
93% of auditors from firms that have not yet been inspected say they fear an inspection, despite being confident that their work is sound. An authority that does not know how its actions are perceived cannot improve them.
Model
The UK’s ICAEW asks those inspected to rate how the inspection was conducted.

See also

How we work towards these changes

We publish analyses and send positions and requests to national institutions — among others the Minister of Finance, the Ombudsman and the Small and Medium Business Ombudsman — as well as European ones: the CEAOB and the European Commission. We take part in public consultations and look for common goals with the professional body.

See also