Nicholas James, Audit Director at PKF BBA in Jersey, reviews the latest ICAEW Audit Monitoring Report for 2025, highlighting the key findings for audit firms and drawing out the particular relevance for those operating in the Crown Dependencies.
The report offers a detailed picture of audit quality across the UK, Crown Dependencies and British Overseas Territories. It highlights areas of strength, identifies opportunities for improvement, and shares practical guidance to support firms in enhancing their audit processes.
Complex files, robust performance
This year’s report shows that 67% of audit files reviewed were assessed as good or generally acceptable. While slightly down on the previous year, this shift reflects a deliberate focus on more complex, higher-risk audits across firms of all sizes.
The Crown Dependencies featured in this review, with one audit file selected from the region. It was rated as generally acceptable, consistent with the prior year. For firms operating in jurisdictions like Jersey, Guernsey and the Isle of Man, where client structures can be intricate and expectations are high, this steady result is encouraging and demonstrates resilience in the face of increasingly demanding reviews.
Opportunities for improvement across the profession
The ICAEW report identifies several recurring challenges that firms – whether in the UK or the offshore centres – should be working to address:
- Risk assessment: A better understanding of IT systems and tailored responses to lower-risk items are key to audit quality.
- Fraud and error testing: Journal entry testing must be adapted for the specific client and cannot rely on default parameters. The presumed risk around management override of controls should not be rebutted.
- Judgements and estimates: Audit teams should be more assertive in challenging assumptions and documenting their rationale.
- Reliance on third parties: Where experts or service organisations are used, firms must demonstrate a clear understanding of their scope and controls.
- Sampling and analytics: Sample sizes must be clearly justified, and substantive analytical procedures must go beyond simplistic comparisons.
These findings are consistent across jurisdictions, and the report’s practical examples offer a helpful reference point for audit teams looking to refine their approach.
ISQM1 and Independence: Good progress, but vigilance required
Most firms have made solid progress in implementing the International Standard on Quality Management 1 (ISQM1), and the report acknowledges the efforts made to strengthen internal quality frameworks. Cold file reviews and root cause analysis are highlighted as particularly effective tools.
That said, the ICAEW has also raised flags around:
- Independence threats, such as acting as a company secretary or trustee for audit clients
- Non-audit services on contingent fees
- Audit eligibility monitoring, with several firms referred for not adequately overseeing their compliance processes
For firms in the Crown Dependencies, where roles may be more fluid and teams smaller, this is a reminder of the importance of robust internal controls and clear role separation.
What this means for firms in the Channel Islands
The audit landscape in the Crown Dependencies differs from that of the UK. Local firms are often smaller and more agile, but they also handle some of the most complex and internationally exposed client portfolios.
The consistency of audit quality seen in the selected file from the Crown Dependencies is positive. It demonstrates that even in high-complexity scenarios, firms in our region are meeting expectations. Looking ahead, embedding ISQM1, enhancing audit documentation, and maintaining strong independence safeguards will be key priorities.
Turning insight into action
The ICAEW’s 2025 report is not just a compliance checkpoint – it’s a roadmap for strengthening audit quality across the profession. For firms in Jersey and the wider Crown Dependencies, the insights are both relevant and actionable.
At PKF BBA, continuous improvement is a core part of our audit culture. We remain committed to investing in the people, systems and quality processes that enable us to deliver robust, independent and value-driven audits, whatever the complexity of the engagement.
To read the full ICAEW Audit Monitoring Report 2025