FCA reminds auditors of their going concern duties
11 August: Yesterday the Financial Conduct Authority (FCA) wrote to senior partners of audit firms to highlight the importance of their responsibility in relation to going concern.
Auditors are not frequently addressees of "Dear CEO" letters from the financial services regulator, so it is vital for firms to pay attention to Monday's letter about reporting obligations, addressed to senior partners.
Firms that audit financial institutions or companies with transferable securities admitted to trading on a regulated market subject to statutory regulation have particular reporting duties. For example, in relation to significant matters arising under SUP3 of the FCA Handbook, sections 342(5) and 343(5) of Financial Services and Markets Act 2000 and UK auditing standards.
The letter emphasises that auditors must report to the FCA as soon as uncertainties arise if it seems that the entity is unlikely to be able to continue as a going concern. Reporting should be done proactively and without delay. It means that firms should not wait until their next contact or meeting with a supervisor or other FCA contact to report, and can use the specific email address for this purpose: email@example.com.
It may be helpful for auditors to consider the FCA's recent guidance for regulated firms on assessing adequate financial resources, which includes guidance on how the FCA assesses the adequacy of a firm's financial resources.