A revised version of the Statutory Auditors and Third Country Auditors Regulations has been published. The Regulations implement the requirements of the Audit Directive that are not already contained in UK law and make changes to UK law to give effect to the Audit Regulation.
The Audit Directive sets out a regime where the government must either be, or designate, a single competent body with ultimate responsibility for all the regulatory tasks provided for in the Directive although with the ability to delegate tasks to other authorised bodies subject to its oversight. The government announce in July 2015 that the competent body for these purposes would be the Financial Reporting Council.
The Audit Regulation introduces directly applicable provisions into EU law specifically for the audit of public interest entities. A public interest entity (PIE) is an entity with securities admitted to trading on a regulated market, banks, building societies and insurers. These provisions include a requirement that all PIEs put their audit out to tender at least every 10 years and change their auditors at least every 20 years.
The Regulations go beyond the requirements of the Audit Directive and the Audit Regulation by applying the provisions of both to the auditors of Limited Liability Partnerships. This is to ensure consistency of approach by making the auditors of LLPs subject to the same audit regulatory framework that applies to companies and other businesses.
The Regulations came into force on 17 June.
The Regulations can be found here and the Explanatory Memorandum here.
Reporting by smaller listed and AIM quoted companies – FRC update
The Financial Reporting Council (FRC) has issued an update to its June 2015 discussion paper on how reporting by smaller listed and AIM quoted companies can be improved. The update includes a summary of responses received to the June paper and an update on decisions and proposals in three areas: reporting requirements and practices; audit practices and company governance and resources.
Points to note include:
- Respondents did not want additional compliance burdens placed on smaller quoted companies
- There was broad support for the FRC to issue annual reminder letters to smaller quoted companies to encourage engagement and highlight areas of importance to investors. The first of these letters was issued in November 2015 (see our earlier article for details).
- A majority of respondents supported having a single accounting framework for all quoted companies and agreed that IFRS was the right framework
- Respondents were keen to have more practical guidance for audit committees and focussed and practical support for those who prepare report and accounts through training.
In this update, the FRC commits that during 2016/17 it will:
- Continue to work with professional bodies to produce focussed and practical training for finance staff
- Engage with the LSE and UKLA to identify opportunities to improve the quality or reporting
- Develop practical guidance for audit committees on evaluating the adequacy of the finance function and process.