FRC strengthens auditing standard ISA 315

The Financial Reporting Council (FRC) has revised its standard for the identification and assessment of risks of material misstatement in an audit of financial statements, with the aim of introducing a more robust and consistent approach

The revised standard, ISA (UK) 315 (revised July 2020) - Identifying and Assessing the Risks of Material Misstatement adopts the revisions made to the underlying international standard issued by the International Auditing and Assurance Board (IAASB).

 The FRC said it strongly supports the revisions and related amendments, noting their importance in supporting a more robust and consistent risk identification and assessment, and believes that they represent an improvement to the current standards and they are also designed to address concerns expressed by regulators and other stakeholders.

The FRC has also issued International Standard on Assurance Engagements (ISAE) (UK) 3000,  Assurance Engagements Other Than Audits or Reviews of Historical Financial Information

The standard adopts the corresponding ISAE issued by the IAASB but has been modified to require that assurance practitioners applying it for engagements that the FRC has designated as ‘public interest assurance engagements’ comply with the FRC's ethical standard.

These will be assurance engagements where an audit level of independence is appropriate and expected by stakeholders.

For other assurance engagements, practitioners have to comply with the relevant independence and other ethical provisions of their professional body and the code of ethics issued by the International Ethics Standards Board for Accountants (IESBA) specific to such types of other assurance engagement.

The FRC has not, at this time, designated any such ‘public interest assurance engagements’. However, it says it is appropriate to adopt the standard now to provide for a timely response should the FRC be requested to regulate the conduct of particular public interest assurance engagements in response to the outcome of recent and future reviews of the scope of auditors' responsibilities and other developments.

Voluntary application to other assurance engagements is permitted (the international version of the standard is already applied voluntarily by firms in the UK).
Mark Babington, FRC acting executive director, regulatory standards, said: ‘The revision of ISA (UK) 315 represents an improvement to the current standard and addresses concerns expressed by regulators and other stakeholders.

‘This standard is designed to meet the challenges of an evolving business environment and the needs of users and protect the public interest. 

‘The UK adoption of ISAE 3000 provides an appropriate principles based standard for the conduct of public interest assurance engagements that are not covered by other specific assurance standards issued by the FRC.’

ISA (UK) 315 feedback and impact assessment is here: https://www.frc.org.uk/getattachment/4e05777f-73c3-4ecc-97a0-9ed5474dac4b/ISA-(UK)-315-Feedback-Statement-Jul-2020.pdf

ISAE (UK) 3000 (JULY 2020): Assurance Engagements Other Than Audits Or Reviews Of Historical Financial Information is here: https://www.frc.org.uk/getattachment/2dc92f3e-df64-47d8-a9de-0292795fc8c3/ISAE-(UK)-3000-Jul-2020.pdf

 

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