Accounting firm Grant Thornton has been excluded from the industry regulator’s top tier of audit oversight after losing a number of high-profile clients.

The Financial Reporting Council downgraded the company from “Tier 1” to “Tier 2” last year, according to July regulatory filings first reported by the Financial Times today.

For companies in the lower category, audits of their “public interest entities” (PIEs) are not carried out annually, but every three years.

Grant Thornton, Britain’s sixth-largest accounting firm, poached more than 70 percent of its “public interest” clients, including listed companies and insurers, between 2016 and 2022.

In 2022, the firm audited 20 PIEs, while competitor BDO had 217 PIE clients during the same period.

Grant Thornton has been fined several times in recent years for auditing errors, including £2.34 million in connection with the bankruptcy of the café chain Patisserie Valerie.

Sarah Rapson, the FRC’s executive director for supervision, told the Financial Times that the firm’s downgrade did not reflect audit quality but rather a “reduced share of the PIE market”. The regulator’s latest audit quality report for Grant Thornton noted improvements.

Grant Thornton told the newspaper: “We are extremely proud of our quality results over the past three years and respect the regulator’s decision to place our company in the Tier 2 regulatory category.”

“The FRC’s decision has no impact on our audit strategy and our ongoing investment in audit quality.”

The “Big Four” Deloitte, EY, KPMG and PwC as well as BDO and Mazars remain the only companies in the “first category” following the downgrade of Grant Thornton.

Increasing the share of challenger firms in PIEs is an important part of the government’s long-delayed promises to boost competition in the industry.

City AM has asked Grant Thornton for comment.