As mentioned in our previous update, Donald Brydon is heading a Government initiated independent review into audit standards. The report is expected to be completed by the end of 2019.
The review was commissioned to consider and address the “audit expectations gap” (the difference between what users expect from an audit and the reality of what an audit is and what auditors’ responsibilities entail).
The Department for Business, Energy and Industrial Strategy (BEIS) has now published terms of reference, setting out key objectives for the review. These include:
- Understanding the needs and expectations of stakeholders who make use of company audits, identifying the origins and perceptions of the audit expectations gap, and options for increasing stakeholder engagement and understanding.
- Considering the scope of audit: what information investors and users of corporate information are likely to require a company to produce, what assurance will be required and how that might be achieved at a proportionate cost to corporates.
- How assurance is provided and how assurance can be made more effective for investors, including considering how technology can be utilised to improve audit assurance and effectiveness.
- The extent to which auditors can and should assess the reliability of underlying information and the impact of uncertain future events.
- How communication of audit findings to users can be improved.
The review will engage with a wide range of stakeholder groups. The independent reviewer will be supported by a number of advisory groups, likely to comprise a user group, an audit profession group and a technology group.