FRC consults on enhanced Ethical and Auditing Standards
Released 15 July 2019
The FRC has released the consultation in response to the recent audit enforcement and quality inspections.
The consultation consists of the Revised Ethical Standard Exposure Draft, and an updated Glossary of Terms (Auditing and Ethics). This consultation also includes an Exposure Draft for revisions made to the International Standards on Auditing (UK) and International Standards on Quality Control (UK).
Some of the key changes proposed are:
•More stringent requirements for a ‘third party test’ whereby auditors are to consider whether proposed action would affect their independence from the perspective of public interest stakeholders rather than fellow auditors;
•Enhancement of the Ethics Partner function within an audit firm to increase the level of supervision and to set out required reporting requirements where an audit firm does not follow the advice of its Ethics Partner;
•A change in the emphasis from prohibited non-audit services, to a shorter list of permitted services that can be provided to Public Interest Entities; and
•To require auditors to disclose their performance materiality threshold used in the audits of all UK listed entities. This must be disclosed in the published auditor’s report.
The FRC does stress that whilst there are a number of reviews in place at the moment including the Brydon Review, the proposals are ‘not intended to pre-empt the outcome of those reviews, or the direction of future government policy’.
The consultation is open to comment until Friday 27th September 2019.