John Selwood's Q&A's
Brexit is already raising numerous questions for and from auditors. In this edition, John gets the ball rolling by tackling what is surely the first of many questions.
Q) This is a fairly obvious (and very big) question: what impact does the United Kingdom’s impending exit from the European Union have on audits?
A) Quite predictably the impact on audit is wide-ranging and enormously dependent upon the industry and the audited entity. Broadly, these are the areas into which auditors might need to put additional thought.
This is an obvious area and above all else this is an audit risk that auditors will need to be vigilant for. In extremis there is a risk that the entity is no longer a going concern. I have already seen a UK subsidiary that exists only because the worldwide group needed a presence in the EU. Brexit calls into question the need for its existence.
In any event, the general uncertainty in the economy should require the management of all entities to carefully consider what uncertainties there are that might affect the validity of the going concern basis. Auditors will need to ensure that management are doing this and more might need to be done to support management’s assertions.
Understand the entity
It almost goes without saying that how Brexit will affect the entity will vary from audit to audit.
This is an extract from an article in the September 2016 edition of Audit & Beyond, the magazine of the Audit and Assurance Faculty.
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