Auditing quality was determined by the board through a review of each firm's ethical policies, engagement performance, human resources, leadership, and internal montoring.

"We found that each of the Big Four firms of auditors have the necessary infrastructure in place, and commitment, to complete good quality audits," said POBA Chairman John Bourn. "However, where the firms do not follow their own procedures they expose themselves to the risk that future audit opinions may not be appropriate."

The inspections identified no systemic weaknesses in the overall policies, procedures and systems of quality control. However, as a result of insufficient documentation, it was often necessary to form a view as to the appropriateness of such judgments on the basis of oral explanations provided, the report states.

The board said it is in the process of making a number of recommendations to each of the firms in their private reports as to the actions it believes are appropriate to address the issues arising from its work.

The largest firms have an opportunity to adjust to the new regulatory regime and the board will monitor the actions taken by them to implement its recommendations, it said.

A copy of the full report can be obtained from http://www.frc.org.uk/poba/publications/.