Grant Thornton, the United Kingdom’s sixth-largest accounting firm, is seeking to regain its status as a tier-one auditor under the Financial Reporting Council’s (FRC) regulatory framework, aiming to restore its reputation and expand its portfolio of high-risk audit clients. The firm was downgraded from the top tier in 2023 after significantly reducing its engagement with public interest entity (PIE) clients, which include large listed companies and financial institutions.

Between 2016 and 2022, Grant Thornton shed over 70 percent of its top audit clients amid a series of penalties and legal challenges related to audit failings. Notable among these were the high-profile collapses and accounting issues at Patisserie Valerie, Sports Direct, and Interserve, which resulted in millions of pounds in fines. This retreat from high-profile audits led the FRC to remove Grant Thornton from the group of firms subject to the most stringent regulatory scrutiny.

Being outside the tier-one category means Grant Thornton’s audits are no longer subject to the FRC’s most intensive oversight, and the firm’s quality inspection results are no longer featured in the regulator’s annual audit quality reports on individual firms. This change has reportedly affected Grant Thornton’s ability to compete for large audit mandates. Some prospective clients have interpreted the downgraded status as a reflection on the firm’s quality, rather than as a classification of supervisory focus, according to Wendy Russell, the UK head of audit at Grant Thornton.

Since 2021, Grant Thornton has been fined more than £4 million for audit shortcomings. The firm has repeatedly requested the FRC to reinstate its tier-one classification or, alternatively, to issue a standalone annual audit quality report specifically for Grant Thornton, reflecting ongoing discussions between the parties.

Tier-one status is widely regarded by large clients as a marker of rigorous audit standards and regulatory oversight, factors that can influence their choice of auditor. For instance, Frasers Group has reportedly sought a Big Four firm to replace its previous mid-tier auditors, underscoring market preferences for firms with top-tier regulatory status.

In 2024, Grant Thornton sold a stake to private equity firm Cinven and has since begun rebuilding its audit client base, particularly among PIEs. The firm has established a target of exceeding 10 percent annual fee growth from its PIE audit practice and identified upwards of 120 audit tenders to pursue. Recent successful engagements include audits for Raspberry Pi and SSP Group.

Meanwhile, the FRC has reviewed its tiering approach and appears unlikely to continue distinguishing audit firms through formal tiers in its future public reporting. This change may alter the competitive landscape and the significance of tier classifications going forward.