Too many audits of U.K.-listed companies are simply not good enough, according to the country’s independent regulator of audit quality.

The Audit Inspection Unit, part of the Financial Reporting Council, said that 11 percent—eight in total—of the audits it looked at in its 2009/10 review needed “significant improvement,” a proportion it said was “too high."

Two of the poor-quality audits that the regulator discovered related to companies in the FTSE 100.

There were two main reason why audits were judged to be unsatisfactory: There wasn’t enough evidence to support key audit judgments, and the audit firm signed off its report before all the audit work had been finished.

There was one major firm in particular that was signing off its reports too soon, the regulator said. It did not name the firm involved.

The regulator said a disproportionate number of the audits it looked at from smaller accounting firms needed significant improvement (six out of 11), causing it to conclude: “Certain firms are undertaking listed or other public interest audits without having the necessary resources and expertise.”

It suggested that there should be a new “competency test” applied to firms that want to audit listed companies.

Echoing the comments made recently by FRC Chief Executive Stephen Haddrill, the inspection unit said auditors needed to be more skeptical in their work, especially reviewing management judgments on fair values, cash flow, and the impairment of goodwill and other intangibles.

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