UK Audit reviews – Brydon review and other recent developments

Apr 18, 2019

Three separate reviews in relation to the UK Audit Sector are at various stages of progress:

  • Brydon Review 'Independent review into the Quality and Effectiveness of Audit' - call for views issued on 10 April 2019;
  • Kingman Review 'Independent review of the Financial Reporting Council' - report issued in December 2018, BEIS Consultation ongoing on various recommendations;
  • CMA Study of the UK Statutory Audit Services Market - two consultations completed and final report just published.

The ‘Brydon Review’ of quality and effectiveness of audit

Following the announcement in December 2018 of the appointment of Sir Donald Brydon by the UK Department for Business, Energy & Industrial Strategy (BEIS) to carry out an independent review into the quality and effectiveness of audit, the Brydon Review issued a call for evidence on 10 April 2019.   The consultation document contains 60 consultation questions on a wide range of matters, including:

  • The ‘expectation gap’;
  • The scope and purpose of audit;
  • Communication of audit findings  and binary audit opinion versus graduated disclosure of auditor conclusions;
  • The auditor’s role in relation to directors’ compliance with relevant laws and regulations, in particular capital maintenance and distributions;
  • The auditor’s role in relation to fraud;
  • Auditor liability issues.

Submissions to the Brydon Review call for evidence will be accepted until Friday 7 June 2019.  The consultation document is available at this link.

Kingman review, CMA review; BEIS Committee report

As previously reported, the Kingman report on the FRC, issued in December 2018, contained 93 recommendations.  The FRC is working voluntarily to take forward 48 of those recommendations.  BEIS is meanwhile consulting on a range of other recommendations contained in the report, some of which will require primary legislation but many which can be implemented in advance of legislation following consultation on significant policy choices.  The consultation document is available at this link.

Submission date for responses to the BEIS consultation is 11 June 2019.

The Competition and Markets Authority (CMA) issued two consultations in its study of the UK statutory audit services market, in October and December 2018.  The CMA has just published this morning (18 April 2019) its final report arising from this study, which includes among the recommendations, a recommendation for an operational split between the audit and non-audit practices of the Big Four firms. The final report is available at this link.

In addition the UK Business, Energy and Industrial Strategy Committee issued a report ‘The Future of Audit’ on 2 April on its  inquiry launched in November, which included oral evidence sessions between January and March 2019.  The report and further details are available at this link. A formal UK Government response will be made to the select committee report.

The Institute, in its role as a recognised Supervisory Body under UK law, made submissions to the above Kingman and CMA consultations and continues to monitor closely and engage with the various consultation processes as they progress.