As ICAEW registered auditors will be aware, in response to changes in the audit market, the growth of challenger firms and some more complex audits moving away from the largest audit firms, we have increased our activities to monitor the audits undertaken across firms registered for audit with ICAEW.
Our monitoring of auditor cessations and other recent intelligence information shows that there are significant numbers of UK companies seeking new auditors – both as a result of the conflict in Ukraine and as firms continue to reassess the wider risks within their audit portfolio.
In respect of cases linked to the Ukraine conflict, currently there is no aspect of the UK ban on provision of accounting services that prevents an audit firm from conducting the statutory audit of a UK registered company under Companies Act 2006. Firms should be mindful of the financial sanctions and particularly any circumstances where these sanctions might prohibit payment for their audit services.
We appreciate that many firms may decide for other reasons that they do not want to be involved in this work. When making these difficult decisions in respect of existing audit clients, firms should always ensure that they consider legal and contractual obligations to the client.
We believe there is now an unprecedented risk to audit quality across the profession. The largest and most highly resourced auditors are now less likely to have the appetite to take on the audit of these companies. The companies themselves have a legal obligation to have an audit and will inevitably be approaching a wide range of other audit firms. Even if these other firms are prepared in principle to act for the company, many of these may not have sufficient depth of experience auditing companies of similar size and complexity, or the resources to guarantee a high quality audit.
All audit firms should already have robust procedures around audit tendering and acceptance decisions. We recommend that all firms urgently review these procedures as they are so critical in the current environment. Although we recognise that the companies themselves are in a difficult position, our overriding concern is that ICAEW registered auditors do not take on audits for which they are ill-prepared and risk undertaking a poor quality audit.
We will continue to monitor the audits undertaken across ICAEW firms and contact firms between monitoring visits about particular audit clients, or groups of audit clients. Extra contact points may take the form of a meeting and/or review of completed audit files and will be in addition to standard audit monitoring visits. The objectives of our work, wherever possible, are to support firms to develop their audit practices and maintain high standards.
In respect of cases linked to the Ukraine conflict, currently there is no aspect of the UK ban on provision of accounting services that prevents an audit firm from conducting the statutory audit of a UK registered company under Companies Act 2006. Firms should be mindful of the financial sanctions and particularly any circumstances where these sanctions might prohibit payment for their audit services.
We appreciate that many firms may decide for other reasons that they do not want to be involved in this work. When making these difficult decisions in respect of existing audit clients, firms should always ensure that they consider legal and contractual obligations to the client.
We believe there is now an unprecedented risk to audit quality across the profession. The largest and most highly resourced auditors are now less likely to have the appetite to take on the audit of these companies. The companies themselves have a legal obligation to have an audit and will inevitably be approaching a wide range of other audit firms. Even if these other firms are prepared in principle to act for the company, many of these may not have sufficient depth of experience auditing companies of similar size and complexity, or the resources to guarantee a high quality audit.
All audit firms should already have robust procedures around audit tendering and acceptance decisions. We recommend that all firms urgently review these procedures as they are so critical in the current environment. Although we recognise that the companies themselves are in a difficult position, our overriding concern is that ICAEW registered auditors do not take on audits for which they are ill-prepared and risk undertaking a poor quality audit.
We will continue to monitor the audits undertaken across ICAEW firms and contact firms between monitoring visits about particular audit clients, or groups of audit clients. Extra contact points may take the form of a meeting and/or review of completed audit files and will be in addition to standard audit monitoring visits. The objectives of our work, wherever possible, are to support firms to develop their audit practices and maintain high standards.