Grant Thornton pushes to regain ‘tier one’ status

Grant Thornton, the UK's sixth-largest accountancy firm, is actively seeking to regain its 'tier one' status with the Financial Reporting Council (FRC) to rebuild its presence in large listed company and financial institution audits. The firm was demoted in 2023 after deliberately cutting its public interest entity (PIE) audit clients to just 20 in the previous year. This move by the FRC meant Grant Thornton was no longer subject to the regulator's most intensive oversight and was excluded from annual audit quality inspection reports.

Wendy Russell, Grant Thornton's UK head of audit, stated that some prospective clients misinterpreted the firm's position outside the FRC's top tier as a ranking of audit quality, rather than a supervisory classification, which negatively impacted its ability to compete for audits. The firm has reportedly asked the FRC to either restore its tier one status or publish a standalone annual audit quality report for Grant Thornton.

Grant Thornton's retreat from the upper end of the market followed years of regulatory fines and legal cases related to audit shortcomings, including those involving Patisserie Valerie, Sports Direct, and Interserve. Between 2016 and 2022, the firm shed over 70% of its top audit clients. It has incurred more than GBP 4 million in FRC fines since 2021. The firm now argues that the demotion has hindered, rather than helped, its recovery and ability to compete for high-value PIE audits.

Being relegated to 'tier two' means Grant Thornton's PIE audits are inspected every three years instead of annually. This distinction has become a commercial impediment, as corporate boards and audit committees are hesitant to appoint a 'tier two' firm for major contracts, effectively locking Grant Thornton out of lucrative FTSE 250 tenders and pushing it towards lower-margin private company audits. The firm is now trying to demonstrate robust internal quality controls and risk assessment protocols to regain the FRC's confidence and re-access the most profitable segments of the UK financial ecosystem.