More than 40 per cent of the reports carried out on disability benefit claimants by the back-to-work assessor Atos are flawed and unacceptable, according to an audit commissioned by the Government.

Following months of complaints about allegedly unfair and slapdash decisions made by Atos, the Department for Work and Pensions audited around 400 of the company’s written reports into disability claimants, grading them A to C. Of these, 41 per cent came back with a C, meaning they were unacceptable and did not meet the required standard.

The lowest grade does not necessarily mean the decision was wrong, but that a serious error or omission occurred, such as no evidence to justify the recommendations, or inconsistencies in the evidence provided.

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The findings mean the company will be stripped of its monopoly on deciding whether people with disabilities are fit to work. The DWP said the poor quality of the company’s written reports were “contractually unacceptable” and announced on Monday it would be inviting other companies to bid for fresh regional contracts by summer 2014 to help reduce waiting times. Liam Byrne, the shadow Work and Pensions Secretary, said: “This is a direct consequence of three years of appalling contract management by Iain Duncan Smith.”

More than 600,000 of the 1.8 million assessments carried out by Atos since 2009 have been the subject of an appeal, at a cost of £60m. Around 30 per cent of the appeals succeeded. Mark Hoban, minister for Employment, said: “Where our audits identify any drop in quality, we act decisively … It’s vital we continue to improve the service to claimants, which is why we are introducing new providers to increase capacity.”

Richard Hawkes, chief executive of the disability charity Scope, said: “It’s about time the Government told Atos to smarten up its act. But, it’s also strikingly clear to disabled people that the whole £112m per-year system is broken.”

A spokeswoman for Atos said: “Our priority is the quality of our work and, following the recent audit, we quickly put in place a plan to improve the quality of written reports.”