What is a dispensation?
A dispensation, if granted, enables a firm to continue providing regulated services if an unexpected compliance issue occurs. The dispensation is a temporary permission to continue while the issue is resolved. It is not suitable for use during planned restructuring, mergers and acquisitions.
What are the changes regarding audit dispensations?
In some cases of ineligibility, in line with the Companies Act, there is a 90-day maximum dispensation period which cannot be extended by ICAEW’s Audit Registration Committee (ARC)
Regulation 2.19 has been amended to make clear which eligibility breaches cannot be extended, it states that the 90-day limit applies only where:
- an individual responsible for statutory audit work ceases to be eligible for appointment as a statutory auditor (regulation 2.02(d)); or
- a registered audit firm fails the audit qualified majority ownership test (regulations 2.03(b) and 2.03(c)).
For other breaches of the eligibility requirements, regulation 2.19 preserves the ARC’s discretion to determine an appropriate dispensation period, where this is not limited by the Companies Act 2006.
Updated guidance notes also clarify this position and confirm that, if the situation that led to the dispensation being granted is not rectified, the ARC will take steps to withdraw the firm's registration.
Other amendments to the Audit Regulations
- Transition provisions – the transitional provisions in regulations 1.05 and 1.05A, which applied to the majority control test and the requirement for a sole practice to appoint an alternative, have been removed as both are now redundant.
- Regulation 2.01 – the guidance has been amended to clarify that the additional conditions in regulation 2.03 apply to firms that are not sole practices or are sole practices that are incorporated.
- Regulation 7.03a – the regulation has been amended to clarify that the criteria referenced in regulation 2.03 applies to firms other than unincorporated sole practices.