FRC announces audit monitoring priorities

The Financial Reporting Council (FRC) has indicated it plans to focus on the use of audit quality indicators (AQIs) and applying technology in audits during its inspections for 2019/20, as the regulator released details of its thematic reviews, priority sectors and audit areas of focus

The FRC said its two thematic reviews will supplement its routine monitoring programme, and are intended to drive improvements in audit quality. The thematic reviews focus on aspects of audit practice across a number of firms to identify both scope for improvement and good practice.

Work to assess the development and use of AQIs by UK audit firms began during the FRC’s 2018/19 inspection programme and will be delivered in 2019/20, providing one area of thematic focus.

The second is technology. The regulator says it last reported on firms’ use of data analytics in January 2017, and now plans to revisit the progress that the firms have made since, how the use of technology has widened beyond data analytics and the potential impact upon audit quality. 

Its priority sectors for review in 2019/20 are listed as financial services, with emphasis on banks, other lenders and insurers; oil and gas; general retailers and retail property; business support services; and construction and materials.

Also as part of its audit monitoring programme for 2019/20 the FRC expects to pay particular attention to the auditor’s work on going concern and the viability statement; the other information in the annual report; long-term contracts; and the impairment of non-financial assets.

The FRC says it will also consider the potential impact of Brexit, in both the selection of audits to review, and the individual areas of audit work to focus on.

The FRC will publish its 2018/19 thematic review of ‘The Auditors Work on Other Information in the Annual Report’ later in 2018, followed by a report on ‘Audit Firm Transparency Reporting’ in the first quarter of 2019.

Report by Pat Sweet

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