Post-implementation consultation on client asset audit standard
The Financial Reporting Council (FRC) has launched a consultation to assess the effectiveness of the client asset audit (CASS) standard, which was introduced in 2015 to provide a principles-based framework to strengthen audit quality in response to some high profile failures
11 Dec 2018
Now that the standard has been used by auditors for three years, the FRC says it is seeking stakeholder feedback to determine whether further measures are needed to support audit quality in this area.
The standard was developed collaboratively with the Financial Conduct Authority (FCA). The FRC says it is seeking input from any stakeholders who have an interest in the client assets regime, which holds trillions of pounds of assets and is of significant public interest.
In the consultation document, the FRC says it believes that the standard has had a positive impact on the quality of audit work undertaken, with evidence of significant investment by some audit firms in training to increase their dedicated CASS resources.
Where stakeholders have challenged the standard, they have raised concerns about the increase in cost that they have experienced as a result of a more robust series of requirements for audit being in place. They have also asked how could those entities which are required to have a CASS audit, get greater value from the process, to help them further improve their control environment and procedures. Both auditors and audited entities have asked whether CASS engagements should apply materiality when developing their audit approach and reporting their findings to the regulator.
Although it appears that the first year saw a higher number of modified reports, this number is now reducing, but the FCA has noted there is still more to do in terms of embedding the use of the new standard.
The FCA has advised it is ‘concerned that some audit firms have not invested sufficiently in building knowledge and understanding of our CASS rules and the FRC standard’ and says it has seen examples where auditors’ reports failed to reflect significant deficiencies in CASS arrangements. The FRC has pledged to seek ways to address this concern as part of the post implementation review.
In the consultation, the FRC is also seeking views as to whether it should seek to develop a monitoring regime to provide a mechanism for better assessing the quality of CASS audit work undertaken in the UK.
Deadline for feedback is 4 March 2019.
Report by Pat Sweet