Deloitte’s managing partner for audit Stephen Griggs says that they will add “significant complexity” for business and predicted “teething problems” across the board.
KPMG’s head of audit Adrian Stone said that an initial inspection of the hundreds of pages that make up the revised standards showed that they are “largely as expected”.
But he pointed to continuing gaps in the guidance, in particular the final rules on mandatory firm rotation, which have yet to be supplied by the Department for Business, Innovation and Skills. “Inevitably, as we seek to implement the new standard we believe that there remain a number of areas where companies and audit firms will need greater clarity of understanding of the detailed provisions.”
The final draft updates make revisions to the UK Corporate Governance Code and the associated Guidance on Audit Committees, as well as to the auditing and ethical standards.
]The FRC says that the revisions to the standards reflect its own review of ethical matters, changes to UK legislation to effect implementation of the ARD and recent developments in international standards. They are designed to enhance auditor independence.
They will apply to AIM companies that are not currently caught by the definition of a PIE if they are above the SME threshold of €200m.
The revised ethical standards will ban the provision of certain types of non-audit services to public interest entities (PIEs) and subject others to a fee cap of no more than 70% of the audit fee calculated on a rolling three-year basis.
Contingent fees for tax services provided to larger listed companies are banned as well.
However, in the light of the FRC’s commitment to proportionate regulation, it has allowed some reliefs which give an auditor leeway to provide additional assistance to SMEs.
“The updates to the code, guidance and standards implement a significant change in audit regulation in the UK which will be overseen by the FRC as a competent authority with the support of the accountancy professional bodies,” said Melanie McLaren, the FRC’s executive director audit.
“The changes will support further innovation by the audit profession in the UK, and ensure that auditors act in a way that is genuinely independent and seen to be in the public interest.
“The UK has led the way on promoting audit transparency and competition on quality so that investors can have confidence in corporate reporting.”
The new auditing regime will come into operation on 17 June.