| 273 | The concept of regularity reflects Parliament's concern that public money raised through taxation on the public is used only for those purposes approved by Parliament. The preparation of financial statements by public bodies is an important means by which they are accountable for the use of public funds made available to them by Parliament. This leads to the financial statements for bodies directly accountable to Parliament including an implied assertion regarding the regularity of financial transactions, in addition to the financial statement assertions identified in ISA (UK and Ireland) 500. |
| 274 | Regularity can be defined as the requirement that a financial transaction is in accordance with: |
| authorising legislation; |
| regulations issued under governing legislation; |
| Parliamentary authorities; and (where relevant) |
| HM Treasury authorities. |
| 275 | As noted in the Introduction, in central government and for specified health entities (including special health authorities, strategic health authorities and primary care trusts) and probation boards and trusts there is an explicit statutory requirement on the auditor to provide an additional statement on the regularity of the transactions underlying the entity's financial statements. This is discharged through the audit of the financial statements and is reported in a separate part of the audit opinion on the financial statements. Regularity adds an additional dimension to the audit of financial statements in the public sector. Nevertheless the auditor, as far as possible, adopts an integrated audit approach covering the audit of the financial statements and of regularity. |
| 276 | The auditor is expected to comply with the Auditing Practices Board's engagement standards and quality control standards on all audits of public sector financial statements. These standards apply equally to the auditor's work in relation to the regularity assertion. The objective of this section is to provide an auditor who has a duty to provide an additional statement on regularity of transactions underlying the entities' financial statements with practical guidance on the audit of regularity and to expand on: |
| obtaining an understanding of the framework of authorities; |
| gathering evidence on compliance with authorities; and |
| giving an explicit opinion on the regularity of transactions (where this is required). |
| 277 | In considering the framework of laws and regulations auditors of central government, specified health entities and probation boards and trusts distinguish between those authorities which are specific to the entity and provide specific direct authority for its financial transactions and those laws and regulations which provide the general framework within which it conducts its activities. Laws and regulations that fall within the general framework include those relating to health and safety, environmental protection and employment. While non-compliance with those laws and regulations that provide the general legal framework would not affect the auditor's opinion on the regularity of transactions it may nevertheless have financial consequences for the entity. |
| The guidance is supplementary to, and intended to be read in conjunction with, the relevant engagement standards and quality control standards and the guidance set out elsewhere in this Practice Note. |
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