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Acts of compliance

Voluntary compliance with the UK Corporate Governance Code varies widely. David Isherwood, Hugh Morgan and Geoff Swales consider when and whether the extended auditor reporting requirements apply.

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The independent auditor’s report on financial statements is changing. When the International Standard on Auditing (UK and Ireland) 700 was revised in June 2013, the requirements included additional paragraphs describing risks of material misstatement, the application of materiality and an overview of the scope of the audit. Those requirements apply to entities that are required, and those that choose voluntarily to report on how they have applied the UK Corporate Governance Code (the Code) or to explain why they have not. These new requirements apply for periods commencing on or after 1 October 2012. Auditors of entities where these requirements apply are also required to consider:

  • whether they have identified any inconsistencies between their knowledge acquired during the audit and the directors’ statement;
  • that they consider the annual report is fair, balanced and understandable; and
  • whether the annual report appropriately discloses those matters that the auditors communicated to the audit committee which they consider should have been disclosed.

As a minimum these requirements apply to all companies with a Premium listing of equity shares regardless of whether they are incorporated in the UK or elsewhere. However, there are a large number of other entities that choose voluntarily to report compliance with the Code to whom these new requirements will also apply...

This is an extract from an article in the December 2013 edition of Audit & Beyond, the magazine of the Audit and Assurance Faculty.

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