Update 26 May 2022: ICAEW has now submitted its final response to the FRC on this consultation, which you can read here
A consultation launched by the FRC last week is proposing that the regulator takes responsibility for the registration of auditors of public interest entities (PIEs) from the recognised supervisory bodies (RSBs) alongside plans to separate PIE auditor registration from the activities of the professional bodies.
Under the proposed regime, the RSBs including ICAEW would continue to provide main audit registration for firms. However, any firm that wanted to do PIE audit work would need to apply for a top-up licence and will need to meet the eligibility criteria to be set by the FRC for PIE firms and PIE Responsible Individuals (RIs).
The changes will also see the FRC determine in the future what action to take in respect of Audit Quality Reports on PIE audits. This will include whether a firm’s registration should continue or be subject to conditions or restrictions.
However, Duncan Wiggetts, Chief Officer, ICAEW Professional Standards, believes that this is not a seismic change: “In reality, the ARC has always implemented in full all recommendations made in AQR reports and the new FRC powers do not appear to be any wider.”
Wiggetts also pointed out the need for there to be close liaison in the future between the two committees as the ICAEW Quality Assurance Department will continue to monitor and present reports to the ARC in respect of all firms’ non-PIE audit work. “It will be important that the Audit Registration Committee is briefed on any concerns identified by AQR which cause the FRC to withdraw a PIE licence or impose conditions on PIE licence so that the ARC can consider whether it impacts the firm’s underlying audit registration for non-PIE work.”
While the PIE audits are the most high profile, they make up a small percentage of the total number of audits carried out by firms. According to FRC data, the Big Four had 1,267 PIE audit clients in 2020 collectively.
Michael Izza, ICAEW Chief Executive, said: “We are supportive of this in the context of having a stronger ARGA, and we will continue to work with the FRC to raise quality and public confidence.”
The consultation is open until 26 May 2022 and subject to its outcome, the FRC’s expects that the new PIE Registration process will be implemented from September 2022 with a transitional PIE Registration process operational for a few months prior to the mandatory PIE Registration process coming into effect.