Audit and Assurance news

The Irish Auditing and Accounting Supervisory Authority (IAASA) has today published its 2021 Annual Audit Programme and Activity Report This report provides a summary of the activities performed by IAASA during 2021 to oversee the audit profession in Ireland. The report outlines the outcome of IAASA’s quality assurance review of auditors of public–interest entities as well as IAASA’s oversight of the recognised accountancy bodies who supervise auditors of other Irish entities. Key outcomes of IAASA’s work on the public oversight of statutory auditors in 2021 include: ·        Inspection of seven PIE firms, reviewing 30 audits and five internal control areas. ·        Conclusion of two statutory investigation into poor quality audit work. ·        Completion of seven joint inspections between IAASA’s Audit Quality Unit and IAASA’s Financial Reporting Supervision Unit. ·        Issuance of thematic reports by IAASA’s Audit Quality Unit on transparency reports and data analytics in statutory audit. ·        Revocation of recognition of two recognised accountancy bodies. ·        Hosting of an Audit Committee briefing. This report provides useful insights into IAASA’s work in overseeing the audit profession and will be of value to stakeholders seeking an enhanced understanding of audit and its regulation. The Annual Audit Programme and Activity Report is available on IAASA's website 

The Financial Reporting Council (FRC) has published a new Audit Firm Governance Code for the Big Four audit firms and firms that audit FTSE-350 companies and significant numbers of public interest entities (PIEs).   The new Code is a result of the findings of a monitoring programme undertaken by the FRC which identified scope to further strengthen its oversight and governance and to align the provisions of the Code with Operational Separation for the Big Four firms.   It separates the roles of the board chair and senior partner/chief executive, clarifies the role played by partnership boards in holding management to account and introduces criteria for board composition, reinforcing the position of independent non-executives within audit firms. For the largest audit firms, it sets out a clearer distinction between the role of Independent Non-Executives (INEs) and Audit Non-Executives (ANEs). The new Code also more closely aligns with the UK Corporate Governance Code, emphasising the importance of long-term sustainability, culture and employee engagement.

The FRC has launched a consultation to take responsibility for the registration of auditors of public interest entities (PIEs) from the recognised supervisory bodies (RSBs).   The proposal will bolster the FRC’s supervisory toolkit and enable it to become increasingly assertive in holding audit firms to account for the delivery of high-quality audit.   Currently, the FRC has insufficient powers to address systemic issues at the firms and must rely on the registration powers of the Recognised Supervisory Bodies. By directly registering audit firms and individuals signing PIE audit reports, the FRC will be able to act decisively when it identifies systemic issues in audit. The FRC will be able to impose conditions, suspensions and remove registration where required.   The decision-making in relation to registration matters will be FRC executive led, in line with the approach of other regulators. The FRC will work closely with the RSBs and other stakeholders to implement the new registration process.

The FRC has published the Exposure Draft of Proposed ISA (UK) 600 Special Considerations -Audits of Group Financial Statements (Including the Work of Component Auditors). The revisions build upon the recently revised international version of the standard, with an enhanced focus on the risk of material misstatement at the financial statement level and the need for robust communication between group and component auditors. The proposed standard is available here.  The conforming and consequential amendments is available here.  The invitation to comment and impact assessment is available here.  The deadline for comments is 8 July 2022.

IAASA has launched an information series on ‘What IAASA does’. This series is intended to promote awareness and understanding of IAASA’s role. Each instalment will focus on a key function that IAASA performs under the Companies Act 2014. It will include a short explainer video along with factsheets and a set of useful links to access other relevant information. The first instalment focuses on the auditing standard setting function. 

The Financial Reporting Council (FRC) has published its 3-Year Plan which sets out the FRC’s progress towards establishing the new Audit, Reporting and Governance Authority (ARGA).    The FRC’s 3-Year Plan follows the government’s 2021 consultation ‘Restoring Trust in Audit and Corporate Governance’, which moved the FRC closer to its aim of becoming ARGA. Respondents to the FRC’s consultation expressed continued support for the establishment of ARGA.     As the journey to ARGA continues, the Plan considers carefully how, and when, the FRC will need to increase its capacity to adapt to new powers and responsibilities. The Plan comprises a detailed breakdown of the FRC’s intended expenditure for 2022-23, alongside a summary of expected costs and headcount for the following two years.   To support the FRC’s plan and act in the public interest the FRC’s core objectives are to: Set high standards in corporate governance and stewardship, corporate reporting, auditing and actuarial work, and assess the effectiveness of the application of those standards, enforcing them proportionately where it is in the public interest. Promote improvements and innovation in the areas for which we are responsible, exploring good practice with a wide range of stakeholders. Influence international standards and share best practice through membership of a range of global and regional bodies and incorporate appropriate standards into the UK regulatory framework Promote a more resilient audit market through greater competition and choice. Transform the organisation into a new robust, independent, and high-performing regulator, acting in the public interest