Making the recommendation to the board on the appointment, reappointment and removal of the statutory auditor has for many years been a fundamental audit committee responsibility. Nevertheless, the recent audit reforms introduce a number of legally binding requirements in relation to audit tendering and rotation that for some Public Interest Entity (PIE) audit committees will represent a significant change to their role.
As businesses develop their responses to the outcome of the UK referendum on continued EU membership, the business-as-usual of preparing financial reports and auditing continues. As the FRC highlight in their recent press release, there are some immediate accounting and reporting implications to consider when preparing half-yearly and annual financial reports.
Our briefing provides an overview of some key considerations.
While the EU Audit Reforms requiring regular audit tendering and rotation only came into effect recently, for many organisations this was already ‘business as usual’. In this paper, we set out four statistics to illustrate the size of the challenge, the progress to date and the impact on audit market share within the FTSE350.
With the implementation date for audit reform fast approaching, we now have more clarity around audit tendering, mandatory firm rotation, the prohibition of many non-audit services and the non-audit services cap. The role of the audit committee however has received little attention. Nevertheless, they have a key role to play if the audit reforms are to be a success; and the new regulations include some new requirements that are difficult to navigate and in some cases will significantly impact the way audit committees of Public Interest Entities (PIE) operate in practice.
Our report looks at the impact of the new regulations across the following areas:
Read the full report (PDF 874 KB)
Read our bite-size briefings:
For many unlisted credit institutions and insurance undertakings, the forthcoming changes to the Prudential Regulation Authority’s (PRA’s) Rulebook will require an audit committee for the first time. The new rules, which are broadly consistent with the familiar Disclosure and Transparency Rules (DTR 7.1) and provisions of the UK Corporate Governance Code, will also apply to listed credit institutions and insurance undertakings.
The EU Audit Reforms have taken a step closer to reality with the release of the latest consultations from The Department for Business, Innovation and Skills (BIS) and the Financial Reporting Council (FRC). With the implementation date just over seven months away, we now have more clarity as to the implication for auditor rotation, non-audit services and the role of the audit committee in the UK.
Our briefing answers key questions on the proposals.
New standards, a surge in M&A activity, continued pressure for better business reporting…all of these factors make this a challenging (and interesting) time for the preparers of financial statements. Our guide, Insights into IFRS: An Overview, is designed to help Audit Committee members and others by providing a structured guide to the key issues arising from the standards.
As part of its ongoing work to enhance confidence in audit, the Financial Reporting Council (FRC) has published a consultation on revisions to the Ethical and Auditing Standards, the UK Corporate Governance Code and related Guidance on Audit Committees. The proposals address the implementation of the new EU Regulation and Directive on statutory audit and a number of other matters which the FRC consider should be introduced at the same time.
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The new viability statement presents arguably the greatest challenge arising from the 2014 revisions to the UK Corporate Governance Code. This short paper explores some of the key issues and provides some practical guidance to help boards implementing the new provision.
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The Financial Reporting Council (FRC) has published its 2014/15 Annual Report on Audit Quality Inspections together with its individual reports on each of the Big 4 audit firms. The FRC inspected 109 private sector audits and believe that overall the quality of auditing in the UK is improving.
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Responding to calls for additional guidance, the Financial Reporting Council (FRC) has issued a 'Practice Aid' to assist audit committees in evaluating audit quality in their assessment of the effectiveness of the external audit process.
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The CMA has released its final order in relation to mandatory audit tendering and the responsibilities of the audit committee. The order follows the findings of the report on the supply of statutory audit services and the provisional remedies publish in July 2014. The two key matters are that FTSE 350 companies are required to put their statutory audit out to tender every 10 years; and audit committees of FTSE 350 companies have had their responsibilities reinforced. The changes apply to financial years beginning on or after 1 January 2015.
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The Financial Reporting Council revised the UK Corporate Governance Code and related guidance. The revisions take effect for financial periods beginning on or after 1 October 2014 and focus on the following key areas:
Going concern, risk management and internal control; Remuneration; Shareholder engagement. Perhaps the most significant change is the introduction of a ‘viability statement’ in addition to enhanced going concern disclosures in the annual report. The viability statement involves a broader assessment of long-term solvency and liquidity, as compared to the accounting going concern concept.
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The new legislation and regulation around EU audit reform will impact all EU entities that have securities listed on a regulated market, are credit institutions, or insurance undertakings. The reforms will impact thousands of entities throughout Europe and have an extraterritorial dimension for groups.
This document discusses the key aspects of the regulation, including auditor appointment and non-audit services, also looking at the transitional arrangements and considerations which audit committees will need to make.
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This document, Insights into IFRS: an overview, is designed to help audit committee members and others by providing a structured guide to the key issues arising from the International Financial Reporting Standards.
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For years ended on or after 30 September 2013, a strategic report was required to be included in the annual report. This document provides some guidance on the requirements.
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For years ended on or after 30 September 2013, new regulations became effective which required additional disclosure in the annual report.
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For years ended on or after 30 September 2013 new regulations came into force which impacted the narrative reporting within the annual report.
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