Audit regulations and guidance
Regulations and guidance for those working in the regulated area of audit in the UK, Ireland and the Crown Dependencies
Current regulations and guidance
Revised Audit Regulations and Guidance came into effect on 6 April 2008, when the relevant sections of the Companies Act 2006 came into force. Periodically, changes are made to the regulations. Firms registered for audit with ICAEW are required to comply with the audit regulations and guidance.
Draft audit regulations for a no deal Brexit
As preparation for a no deal Brexit, a draft set of Audit Regulations has been drafted. These reflect the provisions the UK government has put through in Brexit withdrawal legislation and are indicative of the rules that will apply from the date of the exit. In the event of an agreed exit many of the provisions contained in this draft will still apply. These regulations are intended to be indicative only and have not undergone legal scrutiny or been approved by institute governance.
As the evolving divergence between the UK and Ireland audit framework is significantly amplified by Brexit, it is no longer practical to issue joint regulations for the two countries. Therefore these draft regulations are for the UK only.
The principal changes in this draft set of Audit Regulations are;
- The qualification criteria has been amended to reflect individual qualification pertaining to EEA qualification. This will continue as now, until 31 December 2020. Thereafter it may depend on mutual recognition between the UK and relevant EEA states.
- The ownership and control criteria as well as registration thereof as it pertains to EEA audit firms ceases to operate at 31 December 2020.
- Relationships with the EU27 competent authorities are redefined as third country relationships. This affects rules around the sharing of working papers.
- All references to Irish legislation and those rules applicable to Ireland only are removed.
At this point separate regulations have not been drafted for Ireland. The joint regulations for Ireland and the UK are in the process of being updated for the Irish Companies Act 2018. It is intended these will be issued later this year depending on the timing of Brexit.
The UK has amended its rules in the event of Brexit deal or no deal to continue recognising qualifications on the current basis up until 31 December 2020. No such similar provision has yet been made by EU27 countries in the event of a no deal. Therefore the audit rights in those countries cannot be taken as continuing. Your firm will need to check with the relevant competent authorities for clarification. Continued recognitions in the event of an agreed deal will however apply through the transition period.
The political position for Brexit continues to be fluid. We will continue to work with BEIS, the FRC and the other RSBs to keep firms as best informed as we can.
Audit Regulations and Guidance archive
Audit in Ireland
Although this mainly concerns corporate audit firms, we suggest that all firms that undertake audits of Irish entities read this note which draws attention to a few matters unique to the Irish jurisdiction.
The Audit regulations and guidance were updated in June 2012 to cover both Ireland and the UK as explained in Audit News 51. Most of the regulations are the same for both countries, but there are some minor differences. Regulations unique to Ireland or which do not apply in Ireland are set out in this schedule of changes.
Brexit: Removal of audit rights in Ireland
The Irish audit authorities have interpreted the Audit Directive to mean that non-Irish resident accountancy firms currently on the Irish Audit Register are unlikely to retain automatic audit rights in Ireland after 29 March 2019. For scenario planning, it must be assumed that in the event of a no deal Brexit, UK firms have to cease audit services to existing Irish clients.
Audit requirements in the Crown Dependencies of Jersey, Guernsey and Isle of Man
Special arrangements apply to firms that audit companies incorporated in one of the Crown Dependencies which have 'transferable securities' admitted to trading on a 'regulated market' in the EU. The requirements apply even if the firm or company is not operating in a Crown Dependency.
Audit Regulation 3.09 - successor auditors
Access to audit papers on change of audit appointments after 6 April 2008
For financial years starting on or after 6 April 2008, when an auditor ceases to hold an audit appointment, the successor auditor can look at the working papers of the predecessor auditor. For the avoidance of doubt, although this regulation places an obligation on the 'predecessor' auditor, the appointment referred to in the regulation and at the end of the related guidance is that of the 'successor' auditor. It is irrelevant when the predecessor was appointed. (Note, in the article in Audit News 45, about the implementation of audit regulation 3.09, the reference to 'an accounting period' in the penultimate sentence should be to 'a new appointment'.)
There is additional guidance for both predecessor and successor auditors on the provision of access to information (including example letters to use).
Audit Regulation 3.13 - audit working papers
To help registered auditors with AR 3.13, we've produced some guidance on Audit Regulation 3.13.
PCAOB for non-US audit firms
Issues for audit firms outside the US that audit entities with a primary or secondary listing in the US, or a significant subsidiary thereof, and need to register with the PCAOB.
Changes in firm structure
It’s important to maintain your firm record accurately. An inaccurate or out of date firm record may constitute a misdescription of your firm. It could also lead to regulatory or disciplinary action.
Auditor cessation statements
To help registered auditors with the notification requirements when an auditor ceases to hold office, refer to our Technical Advisory Services helpsheets.
The audit regulations require a registered auditor to be controlled in a certain way (see Chapter 2 of the Audit Regulations and Guidance).
If the registered auditor is a company, it's possible that persons other than the named shareholder may have interests in the company’s shares. This could mean that the company is no longer controlled in accordance with the audit regulations.
The directors therefore need the appropriate powers to call for information about interests in shares, and disenfranchise shares if necessary, so that the registered auditor would continue to be controlled in accordance with the audit regulations.
The following model articles have been drafted to help a firm include special provisions within its articles of association.