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What is audit reform?

Latest developments in audit reform.

Background

In April 2014, the European Parliament and the Council of the European Union issued Regulation EU/537/2014 covering specific requirements regarding statutory audit of public interest entities (PIEs), and Directive 2014/56/EU covering the statutory audit of annual accounts and consolidated accounts.

On 17 June 2016 these changes in EU legislation in respect of statutory audit come into force. The Department for Business, Innovation & Skills (BIS), the Financial Reporting Council (FRC) and other regulators have consulted on the UK implementation of these new requirements which will mean changes to the audit regulatory environment and the codes and standards that auditors have to follow.

Latest developments

Latest developments

June 2016: Statement by Stephen Haddrill, Chief Executive of the Financial Reporting Council on UK implementation of the EU Audit Regulation and Directive (ARD). Following parliamentary approval of legislation to implement the ARD its requirements have now come into force.

June 2016: European Commission Press Release on new EU rules.

June 2016: FEE publishes Member States’ implementation of new EU audit rules - status at 17 June 2016 deadline highlighting the state of play in the 28 member states.

May 2016: The Department for Business, Innovation and Skills (BIS) has now published Summary of responses and Government response to its October 2015 consultation Auditor Regulation: Consultation on the technical legislative implementation of the EU Audit Directive and Regulation which highlights that, overall, there was support for BIS’s minimal implementation approach.

April 2016: The FRC issued final draft updates to the UK Corporate Governance Code and the associated Guidance on Audit Committees and final drafts of revised Auditing and Ethical Standards. The revised standards and Code reflect the FRC’s own review of ethical matters, changes to legislation which, after Parliamentary Scrutiny, are intended to take effect on 17 June 2016 and developments in international standards. The FRC will confirm the final documents and their effective date once these legislative and regulatory processes are complete. FRC press release.

Consultations

Consultations

September 2015: FRS consultation on Enhancing Confidence in Audit: Proposed Revisions to the Ethical Standard, Auditing Standards, UK Corporate Governance Code and Guidance on Audit Committees.

October 2015: BIS consultation paper on Auditor regulation: Consultation on the technical legislative implementation of the EU Audit Directive and Regulation which sought views on its proposals to implement the EU audit directive (2014/56/EU) and a large number of changes to the regulatory framework, including:

  • applying the new EU audit regulation (537/2014);
  • audit retendering and auditor rotation requirements for Public Interest Entities; and
  • the definition of a Public Interest Entity.

December 2014: FRC consultation on Auditing and Ethical Standards implementation of the EU Audit Directive and Audit Regulation.

December 2014: BIS consultation, Audit Regulation: Discussion document on the implementation of the EU and wider reforms.