Audit and Assurance news

A financial statement compilation is a service to assist the management of a business in presenting its financial statements. Members undertaking compilation engagements should refer to International Standard on Related Services 4410 (Revised) Compilation Engagements (ISRS4410) for guidance on the completion of such engagements.  We have issued TA 04 2022 Chartered Accountants’ Reports on The Compilation of Financial Information to highlight a number of matters that may be helpful to an accountant in ROI/UK undertaking such an engagement. The following miscellaneous technical statements, M41 and M48 have been withdrawn. M48 Chartered Accountants’ Reports on the Compilation of Historical Financial Information of Unincorporated Entities M41 Chartered Accountants' reports on the Compilation of financial Statements of incorporated entities

The Financial Reporting Council (FRC) has today published comprehensive professional judgement guidance for auditors to improve how they exercise professional judgement.    Professional judgement is key to high quality audit, however the FRC regularly identifies poor professional judgement as one of the most significant issues affecting audit quality.   The new guidance includes a framework for making professional judgements and a series of illustrative examples. If applied widely, the guidance will improve audit quality by enhancing the consistency and quality of professional judgement exercised by auditors.   The guidance will be of particular use for auditors and central technical teams but will also have wider interest for those interested in audit quality, such as audit committee members and investors.

The UK government has today published plans which aim to revamp the UK’s corporate reporting and audit regime through a new regulator, greater accountability for big business and by addressing the dominance of the main audit firms. The plans, which build upon the recommendations of independent reviews by Sir John Kingman, Sir Donald Brydon, and the Competition and Markets Authority, were published today (31 May) in the government’s response to a public consultation on audit and corporate governance reform. The government response sets out reforms that include:  establishing a new regulator, the Audit, Reporting and Governance Authority (ARGA), recognising the public interest in large private companies, by ensuring they meet the same high standards of reporting and accountability as are expected from large listed companies making large companies’ reporting more useful, with better information about the risks they face strengthening reporting about companies’ internal controls improving the quality of audit and making it more informative, boosting resilience, competition and choice in the audit market, through the introduction of a ‘managed shared audit’ requirement for FTSE 350 companies, and requiring an operational separation of audit and non-audit practices making directors of the country’s biggest companies more accountable for significant failures in their corporate reporting and audit related duties strengthening oversight of the accountancy and actuarial professions to build confidence in the professions and in the UK. Today’s publication also sets out the full range of measures the government is taking starting with a new Ministerial Direction issued today – an immediate step being taken to strengthen the regulator’s oversight of the audit profession. A summary of the proposals can be found here Audit regime overhaul to help restore trust in big business - GOV.UK (www.gov.uk) Chartered Accountants Ireland responded to the Brydon and Kingman reviews. 

The Financial Reporting Council (FRC) has published anonymised key findings and good practices reported by its Audit Quality Review (AQR) team in relation to their 2020/21 audit quality inspections at the seven largest audit firms. https://frc.org.uk/news/may-2022-(1)/frc-publishes-inspection-key-findings-and-good-(1)

In December 2020, the International Auditing and Assurance Standards Board (“IAASB”) released three new and revised Quality Management Standards that enhance and modernise the firm’s approach to quality management: International Standard on Quality Management (ISQM), 1 Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or other Assurance or Related Services Engagements; ISQM 2, Engagement Quality Reviews; and International Standard Auditing (ISA) 220 (Revised), Quality Management for an Audit of Financial Statements. In July 2021 the Financial Reporting Council (FRC) in the UK issued their version, applicable to audits in the UK and in Ireland IAASA followed suit and issued the standards applicable in Ireland in December 2021.   We have published a new Technical Alert and two webpages on these quality management standards which give an outline of the scope of the standards and will help firms understand and apply these new and revised standards.  These also direct members to additional sources of information and guidance on the implementation of the standards.  

The FRC has released 29 updated ISAs (UK), amended to include conforming amendments arising from the revision of ISA (UK) 315 (Revised July 2020) Identifying and Assessing the Risks of Material Misstatement. The revised ISAs (UK) are: 200, 210, 220, 230, 240, 250A, 260, 265, 300, 320, 330, 402, 450, 500, 501, 505, 520, 530, 540, 550, 570, 580, 600, 610, 620, 700, 701, 720. ISQC (UK) 1 has also been updated. A link to the updated ISAs can be viewed here.