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.
Audit reports continue to evolve. The pace and extent of future change are important issues and the views of audit committee members are very relevant to that debate. This report puts forward the case for audit committees to consider, and engage with shareholders, about where they should be on the spectrum ranging from meeting the minimum requirements of auditing standards, through to the inclusion in the audit report of graduated findings and detailed audit risk maps.
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.
Disruption can affect audit committees in different ways. In some cases - for example, cyber security - audit committees may need to become more knowledgeable and more vigilant in their oversight due to the rapid, ongoing evolution of the field. In other areas, such as oversight of reporting and compliance, it is their own approaches and processes that are changing, as complex standards up the regulatory ante.
In the three short documents we look at some of the issues arising from disruptive trends in technology, geopolitics and regulation.
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:
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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.
From a review of eighteen FTSE350 companies who have published their December 2015 annual reports, we share three key observations about 'viability statements'.