Audit Regulations for the UK – January 2021

Jan 08, 2021

From 1 January 2021 separate Audit Regulations and Guidance for the UK have been introduced.  UK specific Audit Regulations and Guidance are necessary to reflect the new relationship between the UK and EU as a consequence of Brexit.  The draft UK Audit Regulations have been published on the Institute’s website and are applicable from 1 January 2021.  Approval of the final UK Audit Regulations and Guidance is pending.

From 1 January 2021, firms and individuals registered by the Institute as statutory audit firms and statutory auditors in the UK will comply with the new UK Audit Regulations and Guidance.   The Institute’s Audit Regulations and Guidance effective from 1 January 2020 continues to apply in the Republic of Ireland (‘ROI’) but will no longer apply in respect of the UK after 31 December 2020.   

From 1 January 2021 an audit firm registered by the Institute in both ROI and the UK will have to ensure compliance with two sets of Audit Regulations.

The UK Audit Regulations and Guidance do not bring significant changes for UK registered audit firms. The main change for firms pertains to the eligibility of EEA auditors and EEA audit firms for inclusion in the majority of owners and managers of a UK audit firm.  We consider that this change is unlikely to have an impact on firms currently registered by the Institute for audit purposes in the UK. 

The ownership rules for a UK registered audit firm from 1 January 2021 require that the majority of the voting rights on the ownership body and management body of the firm are held by:

  • Individuals holding an audit qualification from a UK RSB (including Chartered Accountants Ireland)
  • Audit firms approved by a UK RSB (including Chartered Accountants Ireland)
  • Individuals who hold EEA qualifications, who have passed or applied to sit a relevant aptitude test by 31 December 2020.

Until 31 December 2020 EEA auditors and EEA audit firms could also be counted towards the majority of owners and managers in a UK audit firm.  The change in the ownership rules impacts firms who count EEA qualified auditors (who are not qualified by a UK RSB) and EEA audit firms in their majority of qualified owners and managers.  From 1 January 2021 the qualified majority of owners and managers can only include EEA auditors (who are not qualified by a UK RSB) if the EEA auditors have passed, or applied for, or passed, a relevant aptitude test before 31 December 2020.