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Failure to honour undertakings

The Audit Registration Committee (ARC) takes very seriously cases where firms fail to honour undertakings or assurances they have given to ICAEW, including those given to the Quality Assurance Department during visits, and in subsequent correspondence with the audit regulation section.

Typical undertakings include agreeing to:

  • obtain external hot or cold file reviews and submit the review results to ICAEW within an agreed timescale;
  • reply to correspondence within an agreed timescale;
  • complete accurate annual returns in future (and submit them to ICAEW on time); and
  • carry out specific training or other CPD.

Additionally, firms that wish to retain registered auditor status but which do not currently have any audit appointments, may be required to undertake to notify ICAEW if they subsequently accept an audit appointment.

The ARC takes appropriate action against any firm that does not fulfil its obligations. Depending on the seriousness of the circumstances, this could be in the form of the withdrawal of a firm’s audit registration and/or a regulatory penalty.

When the committee decides on the level of regulatory penalty, it uses ICAEW’s Guidance on Sentencing. The starting point for an inadvertent breach of an undertaking is £3,000, which may be increased or reduced depending on aggravating or mitigating factors. In 2011 the ARC offered eight regulatory penalties to firms that failed to comply with assurances given to ICAEW, averaging £2,700 each.

In addition, the ARC refers more serious cases of deliberate or reckless breaches for disciplinary action. It made seven such referrals in 2011.

If your firm is experiencing difficulties in meeting undertakings given, please contact the audit regulation section (+44(0)1908 546 309 or +44(0)1908 546 311) as soon as any problem becomes apparent.