The Financial Reporting Council (FRC) is consulting on plans to revise the standards for an audit firm’s responsibilities to design, implement and operate a system of quality management, in response to changes made by the International Auditing and Assurance Standards Board (IAASB)
The regulator said the changes introduce a new quality management approach that is focused on proactively identifying and responding to risks to quality.
This requires a firm to customise the design, implementation and operation of its system of quality management based on the nature and circumstances of the firm, using an integrated approach that reflects upon the quality management system as a whole.
The FRC proposes to adopt International Standard on Quality Management (UK) 1 Quality Management for Firms that Perform Audits or Reviews of Financial statements, or other Assurance Related Services Engagements as well as International Standard on Quality Management (UK) 2 Engagement Quality Reviews. It is also seeking to revise International Standard on Auditing (UK) 220 (Revised 202) Quality Control for an Audit of Financial Statements.
When finalised, the quality management standards are proposed to be effective, in line with the international standards, for audits of financial statements for periods beginning on or after 15 December 2022. Early adoption of the revised standards is strongly encouraged.
The FRC is not proposing to add any new UK requirements, saying that the IAASB has sufficiently addressed matters raised by the FRC in its comment letter on the IAASB’s exposure draft.
The FRC is at the same time consulting on conforming amendments to other UK standards.The consultation runs until 19 March.